
Class _H_^JJ_L 
Book --.-C 51 



THE 



Philosophy of Wealth 



ECONOMIC PRINCIPLES NEWLY FORMULATED. 



BY 

JOHN B. CLARK, A.M., 

PROFESSOR OF HISTORY AND POLITICAL SCIENCE IN SMITH COLLEGE. 



BOSTON, U.S.A.: 

GINN & COMPANY, PUBLISHERS. 

1894. 



H^nv 



Entered, according to Act of Congress, in the year 1885, by 

JOHN B. CLARK, 

in the Office of the Librarian of Congress, at Washington. 



Typography by J. 8. Gushing & Co., Boston, U.S.A. 



Pkesswork by Ginn & Co., Boston, U.S.A. 



PREFACE. 



In a series of articles in the Neiv Englander, com- 
menced ten years ago, I endeavored to contribute a 
share toward the reformulating of certain leading prin- 
ciples of economic science. The traditional system was 
obviously defective in its premises. These were as-) 
sumptions rather than facts, and the conclusions! 
deduced from them were, for that reason, uncertain. 
The assumed premises were, at certain points, at vari- 
ance with facts, and the conclusions were, to that ex- 
tent, erroneous. The better elements of human nature 
were a forgotten factor in certain economic calcula- 
tions ; the man of the scientific formula was more 
mechanical and more selfish than the man of the actual 
world. A degraded conception of human nature 
vitiated the theory of the distribution of wealth. 

The prevalent theory of value started with a mis- 
conception of utility, and of the part which it plays in 
exchanges. Economic science, in general, found no 
adequate place for the intellectual activities of men, 
and made no important use of the fact that society is 
an organism, to be treated as a unit in the discussion 
of many processes affecting wealth. 



.V PREFACE. 

The articles referred to endeavored to contribute 
such share as they might toward the needed recon- 
struction of economic theories. They endeavored to 
broaden the conception of wealth, as the subject of the 
science, to find a place in the system for the better 
motives of human nature, to construct a new theory 
of value, to apply at all points the organic conception 
of society, and to suggest other corrections. They 
tried, in general, to bring the premises of the science 
into better accordance with facts, and to bring the 
general spirit of it into greater harmony with the 
instinctive demands of a healthy human nature. 

In this book the most of these articles are repub- 
lished, with varying amounts of revision, and the dis- 
cussion is extended, and made to include, among other 
points, a study of the nature of production and distri- 
bution. The one process is found to consist of a syn- 
thesis, and the other of an analysis ; the same elements 
which are combined in production are separated, step 
by step, in distribution. The process loosely termed 
competition is analyzed, and a new theory of "non- 
competing groups " is advanced, and applied to the 
labor problem. The lines furnished by these groups 
are found to determine the limits of the combinations 
of capital and of labor, which are the distinctive 
feature of the present era. A study is made of 
the laws determining what forms of industrial organi- 
zation shall emerge from the present chaotic condi- 



PREFACE. V 

tioii. The test of economic principles is applied to 
the intellectual and spiritual activities of society. 

There are two or three points in the system, as here 
outlined, which readers of recent economic literature 
might naturally suppose were directly borrowed from 
that source. These were, however, contained in the 
articles already referred to, which were published early 
enough to preclude dependence on anything very re- 
cently issued. Whatever may be their merits or de- 
merits, the theories here advanced are not borrowed 
from the writings of other persons. 

If this book were intended as a general treatise on 
political economy, it would, of course, be very incom- 
plete. It omits whatever belongs to that field which is 
common to economics and practical 'politics. It has 
nothing to say about protection or currency. Ob- 
viously the work cannot be a text-book, in the ordinary 
sense of the term. Teachers who do not want a text- 
book as the sole or chief means of instruction, and who 
prefer to present in their own way the controverted 
practical questions of the day, may, perhaps, find a 
place for it in the classroom. The place which 
it primarily seeks is in the hands of readers and 
thinkers who have long been in revolt against the 
general spirit of the old political economy. 

J. B. Clark. 



PREFACE TO THE SECOND EDITION. 



I COMPLY with the suggestion of a friendly critic in 
stating the relation which the theory of value advanced 
in the fifth chapter of this book bears to that of Profes- 
sor Jevons. My theory was attained independently, 
very long ago, but proved to coincide with that of Pro- 
fessor Jevons in the general fact of establishing a close 
connection between utility and value in exchange, and 
in regarding utility as subject to mental measurements. 
In some more specific points it resembled that theory 
without quite coinciding with it. It has been published 
without change in any of these respects. Features of 
the theory which I still venture to regard as my own 
are the identification of value in all its forms with meas- 
ure of utility, the distinction between absolute and 
effective utility, and the analysis of the part played by 
society as an organic whole in the valuing processes of*^ 
the market. 

Of the twelve chapters of the book, nine treat of 
topics falling within the traditional limits of economic 
science ; while the remaining three discuss subjects 
which a highly orthodox view may perhaps regard as 
lying outside of economic limits. If, however, political 



Vlll PEEFACE. 

economy undertakes to discuss wealth in all its forms, 
and to analyze the forces which actually influence the 
distribution of it, it is difficult to see how these topics 
can be excluded from the discussion. Those who be- 
lieve in a progressive system of economic science will 
probably not desire to exclude them. 

J. B. Claek. 

Northampton, Mass., 
Feb. 2, 1887. 



CONTENTS. 



CHAPTER I. 

Wealth • 1 

The current conception defective. Light derived from 
the Saxon use of terms. Essential attributes of wealth. ^ 
Insubstantial commodities included in the definition ; 
personal attributes excluded. The nature of service ; 
wealth, the material element involved in it. 

CHAPTER II. 

Labor and its Relation to Wealth .... 10 

Labor and service. The economic nature of the effort of 
appropriation. Officers of the law producers; also 
writers, speakers, musicians, etc. Mental and moral 
elements in all labor. Labor not literally the creator 
of every commodity. Four varieties of utility, result- 
ing from four corresponding kinds of labor. 

CHAPTER III. 

The Basis of Economic Law ,32 

Human volition the ultimate cause of economic phenom- 
ena. Need of a correct conception of the nature of 
man. The conception current among economists of 
the past, first, unverified ; and secondly, incorrect. De- 
ductive methods useful, provided the premises are cor- 



X CONTENTS. 

PAGE 

V- rected, Man a part of a social organism. Classifica- 
tion of societies. Relations between the society and 
the individual. Effects of the social relation on indi- 
vidual natures. The expansiveness of higher wants. 
The highest wants unselfish ; their effects in the mar- 
ket. Desire for personal esteem the counterfeit and 
assistant of the highest human motives ; its economic 
effects. Wants as active or quiescent; their normal 
condition. Misuse of the term productive consump- 
tion. 

CHAPTER IV. 

The Elements of Social Service 56 

Men, altruistic ; society, egoistic. Production and con- 
sumption the reverse of each other. Consumption not 
destruction, but utilization ; maximum utilization the 
social goal. Secondary consumption. Social produc- 
tion as including exchange, and involving distribution. 
The nature of sub-products. Exchange and distribu- 
tion, practically merged, logically distinct ; the one a 
qualitative diffusion of wealth ; the other a quantitative 
one. Bargain-making not a part .of the act of ex- 
change, but the determining element in distribution. 
The competitive process analyzed. True competition 
diminishing ; the surviving element a source of danger. 

CHAPTER V. 

The Theory of Value . . . . . . .70 

Need of a definition of value in the generic. Utility in- 
cluded in the popular meaning of the term. The idea 



CONTENTS. xi 

PAGE 

of value a secondary abstraction. Value defined as 
Measure of Utility. Price a mode of expressing the 
measurement. Apparent difficulties of the definition 
removed by distinguishing between absolute and effec- 
tive utility. Method of measuring effective utility. 
Society the measurer, when exchange value is deter- 
mined. Society the purchaser of the products of in- 
dividuals. The absolute standard of value. 



CHAPTER VI. 

The Law op Demand and Supply 91 

Utilities, not matter, the subjects of exchange and distri- 
bution. Wants gratified in the order of their inten- 
sity. The purchase limit ; its variations due to changes 
in prices, and in the relative intensity of different 
wants. The simple adjustment of demand and supply, 
in the case, first, of inexpansive wants, and secondly, 
of expansive ones. The tendency of increasing produc- 
tion to take a qualitative direction. General overpro- 
duction of qualitative increments impossible. Fashion 
as an economic force. Normal price ; this not station-/''^ 
ary. Elementary utilities increasingly costly ; form 
and place utilities increasingly cheap. The predomi- 
nance of the utilities which tend to cheapness. Influ- 
ences which render industry as a whole increasingly 
productive. True and false Malthusianism. Inaccu- 
racies in the orthodox theory of demand and supply; 
an important class of commodities omitted. The 
need of basing the law on utilities rather than on 
• commodities. 



Xii CONTENTS. 

/ PAGE 

CHAPTER VIL 

The Law of Distribution ' . . 107 

The mode of dividing the product of industry changing. 
The moral element in the wage question. The effect 
of the consolidation of capital and of labor. Vague- 
ness of the ordinary conception of demand and supply ; 
their systematic action ; their ]3rimary, secondary and 
ternary fields. Tabular representation of the synthe- 
sis of elements resulting in a single completed product. 
Distribution as the reversal of this synthesis ; the divis- 
ion purely quantitative. The sale of a completed 
product a primary division of social wealth ; that of a 
sub-product secondary ; that of a share of a sub-product 
ternary; the last the criterion of wages. Tabular rep- 
resentation of the principle of non-competing groups. 
The groups, as such, agents in distribution. Examina- 
tion of the theory that the exchange of surpluses de- 
termines prices. Three gradations of competitive ac- 
tion ; abnormal competition the cause of combinations. 
Contrast between past and present conditions. 

CHAPTER Vm. 

Wages as affected by Combinations .... 126 

Products the source of wages. Statement of the Wage- 
Fund doctrine. Errors refuted by applying the prin- 
ciple that distribution deals with pure quantity. 
Wages, as a value, taken from the value created by in- 
dustry, but subsequently embodied in usable forms by 
a process of exchange. Capital essential to this ex- 
change. Wages of a working group taken from a 
specific sub-product, and gauged in amount, first by 



CONTENTS. xiii 

PAGE 

the amount of the sub-product, and secondly, by the 
terms of the division made with the employer. Vari- 
ations historically shown to be due to changes in both 
determining causes. Difference in principle between 
the present and the former mode of dividing products ; 
organization the cause of it. Labor unions a resource 
against an unjust division. Disappearance of individ- 
ual competition. Necessity for appealing to moral 
force in dividing products. Conditions which deter- 
mine whether labor unions shall or shall not follow the 
lines of occupation. The boycott as an instrument of 
coercion. Recent consolidations of capital ; their 
primary and secondary' objects, and their effects on real 
wages. Increased need of moral agencies. 

CHAPTER IX. 
The Ethics of Trade 149 

Gloomy outlook afforded by Ricardianism ; the scientific 
weakness of the system. Moral force the characteris- 
tic of the new regime ; this new only in its mode of y 
action. Its origin as a social force, and its gradual 
extension. Effects of the institution of property. 
Different codes prevalent in the village and the mark 
of mediaeval times ; modern society a fusion of the two 
local elements, and morally dualistic. Competition 
formerly repressed by moral sentiment ; opportunities 
for this agency in the modern market. Disastrous ef- 
fects of abandoning the standard of just bargains. 
Wealth legitimately acquired by production ; acquisi- 
tion by unequal exchanges a prevalent abuse ; oppor- 
tunities for repressing it afforded by present condi- 
tions ; effect of this upon wages. Competition, in its 
surviving fields, tending to become truly free. 



XIV CONTENTS. 

PAGE 

CHAPTER X. 

The Principle of Cooperation . . .' . . 174 

Cooperation an old principle in a new form. Economic 
science formulated by Adam Smith in an era of ex- 
treme individualism ; present tendency to merge the 
individual in the organization. Cooperation a prin- 
ciple of organic, not personal independence. Just dis- 
tribution its aim. Arbitration an appeal to justice 
involving constant recourse to tribunals ; this hostile 
to harmonious effort. Tendency of cooperation to in- 
crease production and harmonize distribution. Small 
limits of possible increase of wages by methods of con- 
tention. Interests of capital and labor identical in 
production, antagonistic in distribution. Tendency 
of the wage system to create a conflict, but to set lim- 
its to overt action. Education a means of narrowing 
these limits, not of abolishing all conflict ; this latter 
possible by cooperation. Effects of profit-sharing ; its 
practicability. Fom- systems of dividing products 
now in use ; the principle which insures the survival 
of the fittest in each particular field. Difficulties of 
new experiments in full cooperation ; the ultimate sur- 
vival of this form to be determined by its effects in 
successful instances. The easiest form of cooperation 
likely to have the greatest immediate extension ; the 
best form to have the longest continuance. Rochdale 
stores and communal farms ; their minor influence on _ 
the wages question; then- educational value. Muni- 
cipal enterprises ; prison and work -house industries. 
Effect on general wages of instances of successful 
cooperation. The permanence of the principle assured. 



CONTENTS. XV 

• PAGE 

The socialistic state ; its principle despotic. Freedom 
the basis of cooperation. 

CHAPTER XI. 

XOX-COMPETITIVE ECONOMICS 203 

Competition no longer general. Rational wealth the 
economic end of social action ; an approximation to 
this end formerly afforded by competition ; the survi- 
val of the principle in residual fields due to a similar 
action ; the princii^le abandoned where it ceases thus 
to act. The highest forms of rational wealth disbursed 
non-competitively. Art products placed at the service 
of the public ; also means of intellectual and spiritual 
education. This disbursal of products of no effect on 
the relation of capital to labor. The principle of in- 
appropriable utilities; its special application to the 
railway problem. 

CHAPTER Xn. 

The Economic Function of the Church . . . 221 

Material commodities which minister to spiritual wants ; 
special modes of disbursing them. Relations of rich 
and poor in this respect. Spiritual poor-relief; the 
principle involved not one of charity. This function 
committed to the church, and fulfilled with some fidel- 
ity. The commodities to be disbursed purchased in 
the open market ; the necessity for a revenue, and for 
securing it in a non-mercantile way. The prevalence 
of semi-mercantile methods. The appeal to the Spirit 
of caste. Reformation needed in the outward forms 
of church activity. 



CHAPTER I. 



WEALTH. 



Practical wisdom was never more iu demand than 
at present. Questions concerning currency, free-trade, 
transportation, etc., are demanding and receiving the 
attention of political economists, and it is in this part 
of their science that the attractive fields lie both for the 
writer and the reader. The period of irreconcilable 
diversity in the fundamental principles of the science 
seems to be past, and one of relative unanimity, in 
thought if not in language, appears to have arrived. 
May theoretical work, then, be laid definitely aside ? 
Not unless fundamental truths are of less importance 
here than in other departments of human thinking, and 
not unless the unanimity concerning them is something- 
more than relative. If obscurity still hangs over prin- 
ciples, the clear apprehension of which is essential to all 
reasoning on the subject, the removal of it, besides hav- 
ing an incalculable value in itself, will afford a wel- 
come supplement to directly practical work. It will 
shed light on the pressing social questions of the day. 
In the present state of the public mind, for example, 
financial heresies and strange teachings concerning the 



2 WEALTH. 

rights of property find a ready circulation ; and, if these 
false doctrines connect themselves, even remotely, with 
fundamental errors of political economy, then the assault 
upon the practical fallacies can never be quite success- 
ful until the underlying errors be exposed and cor- 
rected. Questions on the solution of which the general 
prosperity depends cannot be solved without the clear 
apprehension of correct principles. 

Nothing can be more fundamental in economic 
science than the conception of wealth. Is it worth our 
while to take issue with the current definitions of it? 
Not if the question to be settled is one of terms merely, 
and if the underlying thought is clear. Exactly the 
reverse of this is true of the definition of wealth which 
John Stuart Mill has inherited from Adam Smith, and, 
in turn, bequeathed to the so-called orthodox school of 
political economy. The terms of this definition are not 
seriously objectionable, but the thought which, in the 
discussion, they have been made to convey is so incon- 
sistent with the significance of the terms themselves as 
to carry confusion throughout the science. 

Mr. Mill's conception of wealth is so limited as to 
exclude much that is obviously a proper subject of 
economic study. It has obliged him to revive the per- 
nicious classification of labor as productive and unpro- 
ductive, and expressly to exclude from the list of pro- 
ductive laborers such persons as " the actor, the musical 
performer, the public declaimer or reciter, and the 



WEALTH. 3 

showman"; also "the army and navy, the legislator, 
the judge, and the officer of justice." On the other 
hand, certain economists under the leadership of M. 
Bastiat, impressed by the evils resulting from the 
traditional classification, have found no other remedy 
than that of abandoning the conception, wealth, as 
the subject of their science. 

Yet there is a certain definable thing which is and 
must be the subject of political economy. Whether 
avowed or not, a definite conception is, in reality, under 
discussion in every treatise on this science. For this 
conception the term w^ealth, if used in the strictest ac- 
cordance with history and etymology, is an accurate 
designation. The Saxf)n tceal indicated a condition of 
relative well-being, the state of having one's wants well 
supplied as compared with a prevailing standard. No 
possession common to all men can constitute such rela- 
tive well-being. The limitless gifts of nature do not 
produce it, since they are indiscriminating in their min- 
istrations ; air and sunlight make no differences among 
men, and, though creating absolute well-being, cannot 
create that social condition indicated by the term 
wealth. This relative condition can be produced only 
by that which, besides satisfying wants, is capable of 
appropriation. 

It is by a transfer of meaning that the term which 
primarily designated a condition of life has been applied 
to the things which produce the condition. But not 



4 WEALTH. 

all causes of comparative happiness are included in the 
meaning of the word. Wealth, as historically used, 
signified the well-being resulting from outward rather 
than inward causes. Health and contentment may 
make the shepherd happier than the owner of flocks ; 
yet the owner only is " well off." Reserving a broader 
term to designate well-being in general, usage has em- 
ployed the word wealth to signify, first, the compar- 
ative welfare resulting from material possessions, and 
secondly, and by a transfer, the possessions them- 
selves. 

Wealth then consists in the relative-weal-constituting 
elements in man's material environment. It is objective 
to the user, material, useful, and appropriable. Let us 
apply the term with logical consistency to whatever 
possesses these four essential attributes, and note the 
effect on the traditional conception of wealth. Mr. 
Mill and the orthodox school will be found to exclude 
from their classification things which possess these at- 
tributes, and to include some which do not. They 
recognize as wealth only those things which are suffi- 
ciently substantial and durable to constitute a more or 
less permanent possession, things which would appear 
on the inventory, if society were suddenly to cease pro- 
duciiig and consuming, and apply itself, for, say, a 
month or two, to taking an account of stock. It is here 
maintained that durabilit}^ is not an essential attribute 
of wealth. Durability is a factor of value, and deter- 



WEALTH. 5 

mines, in so far, the measure of wealth in any particular 
product. But products are of all degrees of durability, 
and there is no ground for excluding any of them from 
the conception of wealth on the ground of this simple 
difference of degree. Even the school of writers re- 
ferred to would not hesitate to class the ices of the con- 
fectioner in the same category with the stone wall of 
the mason, though they are at opposite extremes in the 
scale of durability. They would, however, exclude 
music from the conception, on the ground of its insub- 
stantial and perishable character. It is maintained in 
this discussion that, in that which constitutes wealth, 
there is no difference other than one of degree between 
music and a stone wall. The difference in their dura- 
bility is, indeed, one of the factors in their relative 
value ; but both alike possess the four essential attri- 
butes above specified ; they are objective and material 
products ; they are useful and appropriable, and fall 
within the definition of wealth. 

Having unduly limited their conception of wealth in 
one direction, the orthodox writers have unduly ex- 
tended it in another. They have, for example, classed 
as wealth the acquired skill and the technical knowl- 
edge of the laborer. Personal attainments, as subjec- 
tive and immaterial, are excluded from the meaning of 
the term. They are not a possession ; that implies ex- 
ternality to the possessor. They are Avhat he is, not 
what he has. Popular thought and speech broadly dis- 



6 WEALTH. 

tinguish the able man from the wealthy man. A man 
has a potential fortune, not an actual one, in his abili- 
ties. The term indicates a state of being able, and 
implies a possibility ; not an attained result. Labor 
creates wealth, and acquired abilities are potential 
labor. They are to be regarded as the potentiality of 
the human factor of production, and it introduces an 
element of confusion into the science to class them with 
the completed product. If these considerations w^ere 
not sufficient to settle the economic status of a man's 
subjective qualities, it would, at least, suffice for that 
end to apply to them the test of the traditional defini- 
tion itself, in which "exchangeable value" is made to 
be the essential attribute of wealth. In every exchange 
two commodities are alienated, and transferred to new 
ownership. Nothing can be subjected to this process 
which is an inseparable part of one man's being. 

The error of putting abilities and products in the 
same category is wide-spread, and appears in the writ- 
ings of some of Mr. Mill's opponents. As acute a thinker 
as J. B. Say characterizes acquired talents as "a species 
of wealth, notwithstanding its immateriality, so little im- 
aginary that, in the shape of professional services, it is 
daily exchanged for gold and silver." The illustration 
is its own best answer. The talents are not alienated, 
and cannot be so ; the lawyer does not deprive himself 
of them, nor does his client acquire them, by the ren- 
dering of legal service. Their product only is trans- 



WEALTH. 7 

ferable, and that only is a connnodity. It will hereafter 
be shown that the human effort which creates a product 
calls into exercise activities physical, mental and moral. 
If wealth-creating abilities are to be confounded with 
the product which results from exercising tliem, every 
power acquired by effort, involving, in practice, the 
whole man, will have to be classed, as a commodity. 
The error is mentally confusing, and it is disastrous in 
its practical results. Man produces wealth and con- 
sumes it ; but man himself is always distinct from it. 

The illustration just cited suggests an examination of 
the " service " theory of M. Bastiat. As alchemists, 
searching unsuccessfully for gold, discovered com- 
pounds from which oxygen might be extracted, so 
those who have sought for a substitute for wealth, as a 
fundamental conception of economic science, have at- 
tained a compound notion the analysis of which gives 
something which is to the economic theory what oxygen 
is to the chemical. 

According to M. Bastiat it is services only that are 
exchanged in the market ; commodities, indeed, pass 
from hand to hand ; but they are services materialized, 
while others remain without material embodiment. 
" Do this for me, and I will do that for you," is the for- 
mula for the exchange of services in their immaterial 
state; "give me what you have done, and I will give 
you w^hat I have done " is the formula for the exchange 
of commodities. 



8 AVBALTH. 

Now a service consists of an effort and a gratifica- 
tion. In order that it may exist, some one must labor, 
and some one's want must be satisfied. It is apparent 
that effort, as such, gratifies no one. An artisan's 
effort gives pleasure only through the medium of the 
commodity which he produces. The efforts of a body- 
servant give satisfaction only through the modifications 
which they effect in the master's environment; and 
apart from this they would certainly not be wanted. 
Effort is irksome to the laborer, and, by the law of sym- 
pathy, it is irksome to those who witness it; without 
outward results, it would be intolerable to an em- 
ployer. A musician's effort is displeasing in itself, 
though the annoyance which the display of it occa- 
sions is counterbalanced, and a large balance of 
enjoyment is secured, by the objective effect, — musi- 
cal sound. This principle may be easily tested. Let an 
accomplished pianist advertise a concert on one of Mr. 
Petersilea's mute piano-fortes, and promise to display 
a large amount of effort; how many tickets, at a dollar 
each, would he probably sell? Let a voiceless speaker 
attempt to entertain an audience by a similar display of 
effort; how long would the assembly remain together? 
Yet, in either case, absolutely nothing would be want- 
ing but the tenuous outward product, — sound. 

The objective element inseparable from service is 
wealth ; the totality of it is the sum total of social 
products. This material element is the result of effort 



WEALTH. 9 

and the cause of gratification, and furnishes, therefore, 
the necessiuy connection between tlie elements of ser- 
vice. It has invariably the four essential attributes of 
wealth; it is objective to the producer and the utilizer; 
it is material, useful and appropriable. It is distin- 
guishable in every action that can be termed a service ; 
but it is not always tangible, visible and durable. It 
is a mark of progressing civilization when the products 
of labor, the objective elements in service, take as their 
basis the more tenuous materials given in nature. It 
marks a certain supremacy over natural forces when 
man hews stone and fashions timber ; it marks an intel- 
lectual sovereignty when the thought of man impresses 
itself on vibrating air or makes electricity its messenger 
to remote regions. It is the more ethereal products of 
human effort that are the characteristic Avealth of a 
highly organized society. 



CHAPTER II. 

LABOR AND ITS RELATION TO WEALTH. 

Labor is the former of the two subjective elements 
in service, namely, the wealth-creating efibrt. It is 
the making nature subservient to a master, and the 
primitive mode of doing this is by simply determining 
what master an already useful element shall serve. 

Relative weal results from the mere appropriation of 
limited natural gifts. With the unlimited gifts monop- 
oly is impossible ; the ultra-democracy of air and sun- 
light insist on creating, in so far as their ministrations 
can do it, a weal that is equal and universal. But prim- 
itive man may pluck the wild fruit or slay the game in 
his natural Eden, and then vindicate by effort his 
right to enjoy them. He may select a dwelling-place, 
proclaim it his own, and repel intruders ; he may guard 
the fruit-yielding tree, and even the hunting ground 
itself. This is almost the only form of labor which 
exists in the most primitive social state. Man, here, 
lives by the mere appropriation of the spontaneous 
products of tropical nature, and expends his chief 
efforts in guarding his property. The capacity to be 
thus owned and utilized is a primary attribute of 
wealth. 



LABOR AND ITS RELATION TO WFIALTH. 11 

The condition of appropriation is a relation l)et\veen 
commodities, on tlie one hand, and persons, on the 
other, and implies, therefore, that both the commodity 
itself and the society where it exists should be such 
that the relation may be established. The commod- 
ity must exist in limited quantity, and must be of 
a nature capable of being retained in the possession 
of a particular user. The atmosphere, as a whole, is in- 
appropriable from its unlimited quantity; while pleasing 
atmospheric effects, cloud scenery, showers or breezes 
are limited in quantity, but are in appropriable from 
their nature. They minister transiently to whomso- 
ever they will, and, in the long run, with impartiality. 
Except as rain-drops mingle with the earth, or as 
breezes and sunset-colors favor the dwellers in an ele- 
vated locality, and thus impart a value to the land 
itself, there is no power in man to determine the direc- 
tion of their ministrations. The ownership of land 
carries with it only a partial control of the benefits of 
these elusive elements in nature. Utilities which are, 
from their nature, inappropriable constitute an impor- 
tant and neglected subject of economic study. • 

On the part of the society where the commodity 
exists something is also requisite, in order that the rela- 
tion of ownership may subsist. The attributes of 
society which render ownership possible are; it is be- 
lieved, usually ignored altogether in treatises on this 
subject. The existence of these attributes is secured 



12 LABOR AND ITS RELATION TO WEALTH. 

by the labor of a distinct class of persons, whose true 
economic function cannot be apprehended without 
noticing the effect of their labors upon society, and 
thus, indirectly, upon the wealth which exists in 
society. 

In order that the essential attribute of wealth, appro- 
priability, may be realized, the rights of property 
must be recognized and enforced, either by personal 
prowess, or by the agency of legal functionaries. In 
the most primitive of societies the guarding of property 
is done by each owner for himself, and constitutes, as 
above stated, his only regular labor. The earliest gen- 
eral division of labor consists in assigning the protec- 
tive function to men, uniting with it the congenial work 
of hunting wild game, and reserving the more onerous 
industrial functions for women. Civilization partially 
reverses this arrangement ; it includes the majority of 
men in the industrial ranks, and excludes women from 
the heaviest tasks ; but it still reserves a limited class 
of men for the work of protecting property. Compar- 
atively few officers of justice render property so se- 
cure that whatever a man produces becomes his in 
the act of production, and remains in his possession, 
with but a minimum of thought and effort on his own 
part. Useful things are now appropriable in so far 
as the condition of society is concerned. 

In the securing of this result the definition of rights 
is as important as their enforcement, and legislators 



LABOK AND ITS RELATlUX TO WEALTH. 18 

and judges, as well as sheriffs, are, tliereiure, instru- 
mental in producing that social condition which is 
necessary in order that the attribute of wealth, appro- 
priability, may be realized. Whoever makes, interprets, 
or enforces law produces wealth. He imparts to the 
commodities of the society which employs him the 
essential wealth-constituting attribute of appropriabil- 
ity. Commodities may exist in society, and may 
possess any degree of utility ; they may even be appro- 
priable, as far as they are themselves concerned; but 
if social causes prevent their attaining the state of 
appropriation, they lack, in fact, the attribute of ap- 
propriability, and are not actual wealth. The produc- 
tion of social modifications which result in sfivinsr to 
commodities the attribute of appropriability is the 
chief economic function of legislative and judicial 
labor. It is as truly a wealth-creating function as 
the direct production of useful commodities. 

Concerning this important class of laborers much 
misconception has existed. Mr. Mill, repeating the 
error of Adam Smith, classes them as unproductive. 
M. Bastiat, M. Gamier and others term their efforts 
"services," but offer no satisfactory substantive con- 
ception of anything as a product of their labor. Mr. J. 
B. Say, one degree nearer to the truth, classes them 
as producers, on the ground that they enable the in- 
dustrial classes to give their undivided efforts to their 
own occupation, and thus contribute indirectly to their 



14 LABOK ANiJ ITS EELATION TO WEALTH. 

.products. This indirect mode of proving that a class 
of laborers is productive, though plausible and fre- 
quently employed, is extremely objectionable. Every 
class of producers contributes in this manner to the 
products of every other. The shoemaker contributes 
indirectly to the productions of the farmer, by saving 
him the necessity of turning aside from his labor to 
mend shoes ; yet he considers that the shoes, and not 
a share in the farmer's harvest, are the direct product 
of his labor. In like manner the farmer contributes 
indirectly to the productions of the shoemaker, by 
saving him the necessity of turning aside from his oc- 
cupation to cultivate the ground; yet the farmer re- 
gards his grain, and not a share in the shoes, as the 
product of his labor. A direct product must be ex- 
changed if any class of producers is to share in the 
wealth created by anotlier, and every class must have 
a direct product if they are to be classed as produc- 
tive laborers. The direct product which legal officers 
offer in return for their support consists in the attri- 
bute of appropriability which they impart to commod- 
ities. They put, as it were, the finishing touch to 
the products of society, which finishing touch renders 
them marketable wealth ; and this modification, which 
constitutes a difference between potential and actual 
wealth, is that which they exchange for their subsis- 
tence. If the term productive were to be taken in a 
narrow sense, as meaning productive, not of wealth, 



LABOli AiSD ITS ii ELATION TO WEALTH. 15 

but of specitic useful commodities, there would be 
ground fur classing these laborers as unproductive ; 
and tins is the origin of the misapprehension concern- 
ing them that has existed from the time of Adam 
Smith to the present day. These classes are protec- 
tive of useful commodities, but are productive of 
wealth. 

All forms of labor create wealth;* yet for every 
product nature furnishes the substance and man only 
the modes. One class of laborers create, as has been 
shown, the attribute of appropriability; the other 
general class create the attribute of utility. The lat- 
ter is invariably accomplished by producing modifica- 
tions in natural agents objective to the laborer. In- 
dustrial labor is always the applying of a human 
effort to a natural agent. The modification produced 
enables the agent to satisfy a want which it was 
previously incapable of satisfying. This want-satis- 
fying power imparted by labor is a " utility," and, 
if the attribute of appropriability be also conferred, 
wealth is created. A natural agent possessing utility 
and appropriability is wealth, and this only is so. 
The natural agent need not be of a substantial or 
permanent character ; any substance, force or activity 
whatsoever in physical nature, which receives a want- 
satisfying power by means of a laborer's efforts, 
appropriability being presupposed, becomes wealth ; 
and, though its duration be but momentary, and its 
* rarticular cases uf wasted effort are not here considered. 



16 LABOll AND ITS PvELATiON TO WEALTH. 

character insubstantial or intangible, there is no 
ground for excluding it from the category so long as 
its brief utility continues. 

Dr. Roscher has called attention to the intrinsic 
absurdity of calling a violin manufacturer a produc- 
tive laborer, and the artist who plays the violin an 
unproductive one, as is expressly done by Mr. Mill 
and his followers. The violin would, thus, be classed 
as wealth ; the music, the sole end of its manufacture, 
not wealth. The product, music, satisfies a direct 
want, the violin only an indirect one ; the latter is 
an instrument for producing that which satisfies direct 
desire. The direct want-satisfying product is, if any- 
thing, more obviously wealth than the indirect one. 
Relative durability and tangibility are non-essential 
attributes. The mechanic who makes the violin im- 
parts utility to wood ; the artist who plays it imparts 
utility to air vibrations. One product is perceived 
by the senses of sight and touch, the other by the 
sense of hearing. One is extremely durable, the 
other extremely perishable ; but both alike come un- 
der our definition. In both a natural agent has re- 
ceived a utility through human effort; both products 
are wealth, and both laborers productive. 

So the sculptor imparts utility to marble, the painter 
to colors, the photographer to chemical agencies and 
solar light. The designer and the mechanical draughts- 
man impart a high utility to a small amount of plum- 



LABOR A:ND its RELATION TO WEALTH. 17 

bago, and the writer to a small amount of ink. No 
utility of a higher order is conceivable than that 
which the writer imparts to ink and paper, and the 
speaker to vibrating air, namely, the capacity for 
conveying intelligence. A bridge across a stream 
renders an interchange of products possible between 
dwellers on opposite banks. Previously each side 
produced for itself ; after the building of the bridge 
they produce partly for each other, and to tlie great 
advantage of both. Two isolated societies become, by 
virtue of the interactivity caused by the bridge, one 
organism. Publications are mind-bridges ; they ren- 
der an interchange of mental products possible, as 
the bridge over the stream does of material prod- 
ucts. Mental interactivities take place by means 
of the mind-bridge, as physical ones do by the ordi- 
nary bridge. Minds are united in organic life by the 
one means of communication, as bodily activities are 
by the other. If the writings of an author are a 
mind-bridge, the words of a speaker are a mind-ferry. 
As the ferry-boat conveys a farmer's produce to the 
market, so the words of a public speaker, floating on 
air, as a boat on water, convey his intellectual products 
to the place where they find their market. The 
mason imparts utility to the stone of the bridge, and 
the boat-builder to the wood of the boat; jthe writer 
imparts a higher utility to ink, and the speaker to 
sound. All are productive laborers ; their products, 



18 LABOR AND ITS liELATION TO WEALTH. 

in eacli case, are utilities imparted to natural agents, 
and fall within our definition of wealth. But it is 
the intellectual fashioners of tenuous material who 
are social workers par excellence, since the diffusion 
of thought which their products ensure gives intellec- 
tual life to the social organism. 

It is obvious that, in literary and oratorical prod- 
ucts, the utility imparted by the human effort vastly 
transcends the natural agent which is its substantial 
basis. The articulate sounds of the speaker are the 
ferry-bout; the ideas are the cargo, and the latter 
may exceed the former in value to an indefinite ex- 
tent. In this case boat and cargo are a simultaneous 
product; the boat is fitted, in form, to every different 
lading, and the two, as an industrial product, are in- 
separable. This illustration affords the most search- 
ing test of our definition of wealth. The thought, 
as existing in the mind of the speaker previous to 
its utterance in words, does not fall within the con- 
ception. It is subjective to the man, and, like his 
mental faculty itself, is inalienable. It only acquires 
the attribute of transferability when it attaches itself 
to the agent, — the vocal sound. This apparently trif- 
ling agent transforms it from a simple activity into 
an industrial product. Again, with the consumers, 
the audience, the thought continues to exist, or, at 
least, other thought induced by it does so ; but, after 
parting with its material vehicle, the sounds that 



LABOR AND ITS RELATION TO WEALTH. 19 

convey it, it loses the attribute of transferability, and 
becomes again a simple activity, not an industrial 
product. To again become an industrial product, it 
must be freighted again on vocal sounds. Then only 
can it be transferred from hand to hand, receive its 
price in the market, and, for the brief period of its 
duration, be entitled to its place on the inventory of 
social wealth. 

As the widest range of application is given to the 
term natural agent, so an equally broad application 
must be given to the term labor. The human activity 
which produces wealth is an activity of the entire man, 
physical, mental and moral, and there is no industrial 
product so simple and so purely material that these 
three elements of the human agency are not repre- 
sented in it. In proportion as the intellectual element 
in the labor predominates over the physical, and as the 
moral element predominates over both, the product rises 
in the scale of respectability and of value. The labor 
of a stone-mason involves a physical effort in the simple 
moving of materials, an intellectual effort in their skil- 
ful combination, and a moral effort in the conscientious 
use of proper materials and methods. The result of 
the physical effort is seen in the position of the mate- 
rials that have been moved in the construction, that of 
the intellectual effort in their strong and tasteful 
arrangement, and that of the moral effort in the cer- 
tainty that, in ways not obvious to the eye, the inter- 



20 LABOR AND ITS RELATION TO WEALTH. 

ests of the owner have been consulted by the builder, 
at his own expense, and that the wall is, in all respects, 
as strong and as durable as it seems. In literary, profes- 
sional, and educational labor, the intellectual element, 
of course, predominates to an indefinite extent over the 
physical, and the moral element is greatly increased. 
The latter appears, in the labor of the writer, in his 
sincerity of purpose ; in that of the lawyer and the phy- 
sician, in their disinterestedness; and, in all the more 
intellectual kinds of labor, in their general faithfulness 
and conscientiousness. Reliability is an attribute of 
the product in each case, and the moral factor in the 
labor is that which produces it. 

The debated question whether moral qualities are 
paid for is thus simply and easily decided. The 
product is paid for ; reliability is an attribute of the 
product which determines its value, and the laborer 
who can produce something having the attribute of 
reliability can secure an enhanced price for it in the 
market. All labor is indirectly paid for; its com- 
pensation is in the market value of its product, 
and, in so far as moral efforts are represented in an 
industrial product, they are paid for as truly as other 
activities of the laborer. No activities of man, physical, 
mental, or moral, are paid for when not embodied in an 
industrial product, and it is of importance to remember 
that labor, as such, is not paid for. No employer takes 
pleasure in the sweat of his laborer's brow ; he regrets 



LABOR AND ITS llELATION TO WEALTH. 21 

it, and would willingly pay the same compensation to 
the same i)erson if that particular product could be 
produced, by that person only, without effort. The 
product is tlie desired object in each case, and the 
labor, apart from its product, is not paid for and is 
never a commodity, and nothing but confusion results 
from so viewing and treating it. The statement so 
frequently met with in works on Political Economy 
that "labor is a commodity and is governed by the 
same laws as other conunodities "' is one of the mis- 
chievous errors that still cling to the science. The law 
of wages, the subject of desperate controversy, is, as we 
shall soon see, placed in a new and clear light when 
one apprehends, in its full bearing, the principle that 
the wage of labor is the market value of its product. 

In view of the constant presence of these three ele- 
ments in labor, the physical, the mental, and the moral, 
any effort, in the supposed interest of the working 
classes, to depreciate mental labor in comparison with 
physical is unintelligent. All labor is mental. To a 
large and controlling extent the mental element is 
present in the simplest operations. With the laborer 
who shovels in the gravel pit the directing and controll- 
ing influence of the mind predominates, to an indefi- 
nite extent, over the simple foot-pounds of mechanical 
force which he exerts. The latter could be better fur- 
nished by an ox. It would take certainly three stout 
men to exert as many foot-pounds of force as a single 



22 LABOR AND ITS RELATION TO WEALTH. 

OX, and if such a laborer is able to secure larger wages 
than the third part of the cost of the labor of an ox, he 
may place the difference to the credit of intellectual 
labor. The numerical estimate has been made liberal, 
since sometiing is to be allowed for the superior physi- 
cal form '^f the man. 

Whatever possesses want-satisfying capacity and 
appropriability is a form of wealth, whatever may be 
the source from which it comes. Its origin is unimpor- 
tant in the classification, and it may or may not be the 
result of human labor. In some instances it is not so. 
The original and indestructible properties of the soil 
are not the result of human effort, and recent German 
thought has demonstrated that they possess an original 
value, from limitation in quantity, independently of the 
increased value which results from their artificial im- 
provement. The original forest trees, water powers, 
minerals, some wild game, and many other things owe 
the value which they possess to their want-satisfying 
capacity, and their appropriability, not to the mode of 
their origin. That origin is not labor. The measure 
of their value is determined, in an indirect and general 
manner, by labor. A man might be willing to give for 
one of these spontaneous products of nature the amount 
of labor which would produce or purchase another 
product of equal utility. Labor is the measurer, not 
the originator, of their utility, and even as a measurer 
is indirect and tardy in its operation. The doctrine 



LABOR AND ITS RELATION TO WEALTH. 23 

that labor is the sole originator of wealth is, perhaps, 
the central doctrine in the system of Adam Smith, and 
it was an efficient instrument in his hands for combat- 
ing the Mercantilists and the Physiocrats. It was 
accepted as a grand truth, as opposed to these perni- 
cious systems, and it has served the purpose of a truth 
in the history of the science. It is, in fact, a grand 
error, and the time has abundantly arrived for its criti- 
cal examination and essential modification. 

Few statements are more common in text-books of 
Political Economy than the assertion that " nothing 
can constitute wealth which is not the product of 
labor." As the statement stands it can only mean 
that every commodity classed as wealth must have 
actually been produced by labor. In this form it re- 
quires but a single illustration to refute it. The 
original and indestructible properties of land are 
wealth, and they are not the product of labor. It is 
less erroneous to say that, though commodities may 
be produced by nature, their exchange value is the 
product of labor. A diamond accidentall}^ discovered 
does not owe its utility to any labor actually expended 
in its production ; but it does owe the measure of its 
value to a calculation in the mind of the purchaser 
as to how much labor would be necessary in order 
to obtain another like it. The seller wjll demand 
and the buyer will give what would purchase a simi- 
lar commodity. Actual labor is not the criterion, but 



24 LABOR AND ITS RELATION TO WEALTH. 

supposed labor, or mental considerations relative to 
labor. Utility is here given in nature without labor ; 
value is measured by a calculation in which supposed 
labor is a basis. It is only when questions of quan- 
tity are considered and the measure of this value de- 
termined, that even considerations of labor are intro- 
duced. The measure of the exchange value of all 
commodities is determined indirectly, approximately 
and tardil}^ by considerations relative to labor. So 
fluch onlj- of this doctrine can be maintained. A few 
simple illustrations will sufficiently establish this point. 
Suppose a chance medical discovery were to create a 
demand for some plant previously valueless. The 
plant would have value immediately, and would at 
once be exchangeable for something; but, ignoring 
the additional value resulting from gathering it, its 
value in the field would not be traceable to any labor 
expended in its production. For a time it would be 
unknown how much labor would be necessary for its 
production, and during this time, neither the fact of 
its utility nor the measure of its value could be re- 
ferred to considerations of labor. Only after a time 
would labor determine this measure. If labor were 
a talisman which turned everything to gold, the slag 
of a blast-furnace should have value as well as the 
iron. The difference between them is in their 
utility, not in their origin. A chance chemical discov- 
ery might reveal uses for the slags in their present 



LABOR AND ITS RELATION TO WEALTH. 25 

form, and they would then become wealth ; but they 
would have been a product of labor before they be- 
came wealth as well as after. The existence of their 
newly-acquired utilit}' could not be referred to labor, 
and for a time even their value could not be so deter- 
mined. Aside from questions of measure, wealth is 
directly traceable, not to labor, but to the want- 
satisfying capacity and the appropriability of com- 
modities. 

Not every form of wealth is created by labor ; but 
every form of labor creates wealth, Man toils, not be- 
cause labor always precedes wealth, but because wealth 
naturally follows labor. The possession of want-satis- 
fying products is what the laborer seeks, and desire 
is the moving force in the whole process. Labor is 
not to be conceived of as the vis a tergo that pushes 
wealth forward ; but wealth is to be conceived of as 
the siren that lures labor onward. Wealth is alwa3's 
the cause of labor ; labor is not always the cause of 
wealth. There are spontaneous natural products, and 
there are industrial products ; the earth may be self- 
subdued, or it may be subdued by labor. Nature 
subjected and appropriated is wealth ; man's subjec- 
tion of nature is labor. 

Labor imparts want-satisfying powers, or utilities, 
to natural agents. These utilities are of four kinds, 
and may be arranged in four corresponding classes, 
namely, elementary utility, form utility, j^lace utility 



26 LABOK AND ITS llELATION TO WEALTH. 

and time utility. New matter can not be created by 
man ; but by chemical and vital changes in existing 
matter new material may be produced. The produc- 
tion of new material creates elementary utility, and 
this is preeminently the province of the agriculturist. 
Mining involves some change of place in the ore, 
but the labor of discovering and freeing it from the 
superincumbent earth is, prominently, a creating of 
elementary value, and mining should, in general, be 
classed with agriculture. 

Existing materials generally require changes of 
form to fit them for satisfying wants, and the quality 
imparted by these changes is form utility. This is 
the office of the manufacturer, and, to a large extent, 
of the merchant. The forming of wool into cloth, of 
iron into tools, of wood into buildings, of stone into 
walls, etc., are obvious illustrations. The subdi- 
vision of articles purchased in bulk to suit the wants 
of the consumer is to be regarded as the creation of 
form utility. The man who desires only a pound of 
a particular commodity can afford to pay for it at a 
higher rate than if he were compelled to purchase a 
supply greatly in excess of his needs. The adaptation 
of the quantity to his needs creates an actual utility 
for him, and brings many enjoyments within his reach 
which would be otherwise unattainable. Subdivision 
creates form value, and its reward is legitimate. 

A material in the requisite form may need removal 



LABOR AND ITS DELATION TO WEALTH. 27 

to the proper place in order to enable it to satisfy 
wants. Transportation confers on commodities the 
utility of being where they are wanted, and creates 
place utility. This is obviously created when commod- 
ities are brought to the consumer, but is not less truly 
created when the consumer is carried to the commod- 
ity. Place utility lies in tlie relative position of con- 
sumer and commodity, and both freight and passenger 
traffic produce it. The fact that it is relative and not 
absolute place which determines this utility distin- 
guishes it from form value, as in manufactures. Manu- 
facturing processes can be resolved, in the last analysis, 
into changes of place. The carpenter moves shavings 
and chips from the wood Avhich he is shaping. The 
mason locates brick and mortar in contact with one an- 
other. The woolen manufacturer locates fibres of wool 
and coloring matter in certain positions. All these 
changes of place are irrespective of the consumer, and 
result only in giving form to the product, while place 
utility requires a relative position of the consumer and 
commodity. 

A material in the necessary form and place may 
not be so at the requisite time for satisfying wants. 
Ice in winter, agricultural implements out of season, 
and, in general, all commodities at a time when they 
are not wanted, are obvious illustrations oi; products 
requiring this additional utility to fit them for con- 
sumption. The fact of existing at a time when 



28 LABOR AND ITS RELATION TO WEALTH. 

it is wanted gives to a commodity the attribute of time 
utility. The creation of this value is the office of 
capital, and the nature of capital does not come within 
the limits of this discussion ; but it is sufficiently 
obvious that time value results from human effort and 
abstinence. Its creation is a chief function of the 
merchant, and it is of inestimable benefit to his cus- 
tomers. If every consumer were obliged to keep on 
hand a supply of what he requires for sustenance and 
comfort during indefinite periods of disuse, the number 
of comforts which individuals could enjoy would be 
reduced to a minimum. The idle capital of society 
would be increased a hundred-fold and the list of 
its comforts proportionately reduced. The creation of 
time utility by the merchant is one of the most benefi- 
cent of human industries, and its reward one of the 
most legitimate. 

Having defined our conception of Wealth, Labor 
and Utility, it may be well to apply to the definition a 
few of the cases most difficult of classification under 
prevailing systems. All artistic productions are crea- 
tions of form utility, and differ from each other only 
in the different agents to which this quality is im- 
parted ; the architect imparts it to buildings, the sculp- 
tor to marble, the painter to colors. The musician 
imparts it to the natural agent, sound, and the public 
reciter and speaker give a different kind of form value 
to the same natural agent. The teacher is a pro- 



LABOll AND ITS RELATION TO WEALTH. 29 

ducer of form and place value, more especially of the 
latter. The confusion which arises from considering 
that the product of the teacher's labor is found in 
the mind of the pupil has already been noticed. The 
pupil is not the natural agent which the teacher uses; 
he is the consumer of that which the teacher produces, 
and, in practice, he, or others in his interest, pay the 
teacher for his product. The acquiring of instruction 
is the consumption of intellectual nourishment, as eat- 
ing is of bodily nourishment ; both are facilitated by 
the labor of attendants. There is a creation of minor 
form utilities in the carving of meat, the cutting of 
bread, etc., and of minor place utilities in the passing 
of plates and dishes. In the school-room there is a 
similar carving and cutting process in the assigning 
of lessons; the student takes his mental nutriment, like 
his physical, in portions adapted to his consuming- 
capacity. As it would be absurd to say that the waiter 
and the cook find the product of their labor in a utility 
imparted to the body of the person who eats, so a 
similar absurdity exists in supposing that the teacher 
finds his product in a utility imparted to the mind of 
the one who learns. Both eating and learning are 
acts of consumption. They, in each case, result in a 
capacity to labor on the part of the consumer, but 
this personal endowment is not to be confused with 
the products which may, later, result from the exercise 
of it ; working capacity is the natural result of assim- 



30 LABOR AND ITS RELATION TO WEALTH. 

ilating nutriment. The teacher is usually the waiter 
at the intellectual table, while the cook is the author 
of the text-books which he uses ; it is, however, an aim 
of higher education to unite these functions. 

It is unnecessary to state that any natural agent not 
originally wealth becomes wealth when it receives, 
through the agency of labor or capital, either of the 
four utilities above noticed. Air has place utility 
when forced into a mine or a diving-bell. Water has 
form utility in a fountain, place utility in a street 
hydrant or watering cart, and time utility in the res- 
ervoir of a manufacturing village, where it is retained 
for use during the dry season. If there are any prod- 
ucts which, at first glance, appear as exceptions, they 
are, on closer inspection, clearly seen to be illustra- 
tions of our definition of wealth. Some classes merit 
more extended consideration than is here possible, 
but it is believed that the above classification will be 
found to cover the whole field of industrial labor. 
Wherever human effort produces commodities, it will 
be found to be conferring one of these four utilities on 
a natural agent, or, in other words, to be subjecting 
nature. This view is, singularly enough, presented 
in a work that is old and familiar enough to have 
well attracted the notice of those who have ransacked 
the classics for fragmentary allusions to economic 
science. In the picture of the origin of society foun^-^ 
in the book of Genesis, man is first represented in the 



LABOE AND ITS RELATION TO WEALTH. 31 

primitive paiadisiiical state, conscious of no artificial 
wants, and supplying his few natural wants from the 
gratuitous productions of tropical nature. He eats of 
the tree of knowledge, and, by this means, becomes 
conscious of his simplest artificial want, and of the 
necessity of supplying it by making nature service- 
able. He passes to the state of actual development, 
with the primitive paradise behind him and a restored 
paradise, as the ever receding goal of his progress, in 
the indefinite future before liim, and it is here that 
the injunction is laid upon him, or the law is written 
within him, the fulfilment of which involves his whole 
economic development, the command, namely, to "re- 
plenish the earth and subdue it.^' 



CHAPTER III. 

THE BASIS OP ECONOMIC LAW. 

Economic laws depend on the voluntary action of 
men, and the science therefore professes, in effect, to 
teach how men will act under given circumstances. 
If prices rise, it is because some men choose to demand 
and others consent to give more money than formerly 
for the products of industry. To predict such a rise 
is to foretell the action of the human will. Assum- 
ing that the will is governed by desires, the meta- 
physical view most favorable to j)rediction, we still 
encounter the fact that the motives of human action 
are the ultimate determining forces, and that a mis- 
conception as to the nature of these motives is liable 
to vitiate any conclusion which may be attained. 
The value of the results of economic reasoning de- 
pends on the correctness of its assumptions with re- 
gard to the nature of man. If man is not the being 
he is assumed to be, there is no certainty that the 
conclusions will be even approximately correct. 

It is more than can be here undertaken, to prove, 
by the analysis of leading works, that the motives 
attributed to men have been, in fact, erroneous. 



THE BASIS OF ECONOMIC LAW. 33 

That must be done by the reader for himself, by the 
study of those works. It is, however, believed and 
asserted that a candid reading of the literature of this 
subject will produce the conviction that writers have 
troubled themselves very little with anthropological 
investigation. Their attention has been employed, 
and well employed, elsewhere. They have assumed, 
as the basis of their science, a certain conception of 
man, and have employed their acuteness in determin- 
ing what results will follow from the social labors of 
this assumed being. The premises have not been 
adequately verified ; the system is, in so far, an ideal 
one, and it is, therefore, a matter of some chance 
whether its results are correct or not. Econ omic 

R p.ipncR has riftver been bnspd on Mrlp fj^nntp mifjrmpo- 
logical stj iidy;^___ 

Inaccuracies in the science which result from inade- 
quate conceptions of man are not to be rectified, as 
has been asserted, by a proper allowance for " disturb- 
ing forces." The actual course of a cannon-ball may 
be determined by a mathematical computation followed 
by the proper allowance for atmospheric resistance ; 
but the social activities of men cannot be determined 
by assuming that man is a being of a certain kind, 
elaborating the conclusions with nicety, and then en- 
deavoring to introduce the proper allowance for the 
fact that man is, after all, a being of quite a different 
kind. As INIr. Ruskin has well said, such disturbing 



34 THE BASIS OF ECONOMIC LAW. 

influences are rather chemical than mechanical. " We 
made learned experiments upon pure nitrogen, and 
have convinced ourselves that it is a very manageable 
gas; but behold! the thing which we have practically 
to deal with is its chloride, and this, the moment we 
touch it on our established principles, sends us with 
our apparatus through the ceiling." 

The only right course under such circumstances is 
to begin at the beginnihg and determine by investiga- 
tion the nature of man, the subject under considera- 
tion ; and this course should be adopted whether 
existing conclusions be true or false. The object is 
not so much to attain different results from those 
already reached, as to attain the same ones by a more 
legitimate method. The process which changes some 
false results will verify many true ones. The image 
which the scientist has constructed as the subject of 
his discussion may or may not resemble the man whom 
God has created ; the latter only is the true subject of 
political economy. The science, which has rested on 
a temporary blocking of assumption, needs to be built 
on a permanent foundation of anthropological fact. 

Having determined that the man of whom the eco- 
nomics of the past has treated is largely the creature 
of assumption, consideration will farther develop the 
fact that the assumed man does not, in fact, resemble 
the real one in several important respects, and that 
there is not only a possibility, but a moral certainty 



THE BASIS OF ECONOMIC LAW. 35 

that some erroneous conclusions have resulted from 
this discrepancy. The assumed man is too mechan- 
ical and too selfish to correspond with the reality ; 
he is actuated altogether too little by higher psycho- 
logical forces. What is true of a laboring machine 
requiring only to be housed and clothed, and to be 
fed, — that is, supplied with fuel as a motive power, 
— will certainly not be altogether true of a laboring 
man in modern society; and what is true of a being 
whose affections, aspirations, and conscience are merged 
in an abnormal love of acquisition will not be true 
of those who accumulate and disburse fortunes in the 
actual world. 

The inadequate basis on which the traditional sci- 
ence rests is, in part, responsible for the growth of 
the German Historical School, in which the laws of 
wealth are sought by a study of recorded facts, rather 
than by deduction from assumed premises. Yet he 
must be ill informed who anticipates that, in the work 
of this popular and growing school, deductive reason- 
ing itself will fall into disuse. No one, perhaps, uses 
such reasoning more acutely than Professor Karl Knies, 
of Heidelberg, who deserves, as much as any one, the 
credit of having given to the historical method a sci- 
entific standing. Logic must do its work, but its re- 
sults must be verified. What is here claimefd is that 
its premises need first to be verified. The assumptions 
of political economy need to be subjected to a com- 



36 THE "BASIS OF ECONOMIC LAW. 

parison with facts. It is on its anthropological side 
that the traditional science is most defective, and it is 
by adequate studies in this direction that results may- 
be attained which history will confirm. A broad field 
is thus opened for occupation. The first steps may be 
slow ; it is easier to view a promised land from, a moun- 
tain top than to capture it from the Canaanites. It 
is easy to take in at a glance the vast results that 
will follow from reconciling theory and practice in this 
department; but to trace the elusive laws of human 
nature, and to search through the maze of social facts 
without losing the grasp upon principles, will afford 
work enough for one generation. 

What is here proposed is to point out this field, and 
then to cultivate it to a slight extent ; it is to take from 
it, as it were, a first sod-crop, which will in nowise 
measure the ultimate fertility of the soil. It is pro- 
posed to consider certain facts relative to the nature 
of man, selecting those which require but little in- 
vestigation, and which need only to be stated to be 
admitted, and, later, to apply these facts to some 
economic problems. If any light is thus thrown on 
questions now in doubt, if any new starting-point 
seems to be attained for future investigation, or if any 
modification results in economic principles as now un- 
derstood, much greater and more valuable results may 
be expected from more extended inquiry. The sim- 
pler and more obvious the anthropological facts here 



THE BA8IS OF ECONOMIC LAW. 37 

cited, and the more familiar the economic questions 
to which they are applied, the stronger is the infer- 
ence as to the ultimate value of completer anthropolog- 
ical studies. Such studies would give a new character 
to political economy. They would verify its truths, 
correct its errors, impart to it a kindly and sympa- 
thetic quality, and elevate it to a recognition of those 
higher soul-forces which it has heretofore practically 
ignored. 

It is not merely man as an individual that needs to 
be considered. A man is not independent. So close 
is the relation between him and others of his race 
that his conduct is dictated and his nature transformed 
by it. Though a self-directing being of the highest 
organization, he is made, by his relations to others, to 
be an atomic portion of a higher organism, — society. 

An organism is a living structure ; and, though this 
phrase suggests the need of formulating a definition 
of that indefinable thing, life, it serves to distinguish 
an organism from other structures. The parts of an 

nvgaTnam_J ]jivp hppn -sm i fl tn bn r. O minted that " each 

is^a£tlTP_3 ?inp timp^the meai is_aiuL-the-eud-af alLthe-- 
nthprs. ^ The rootlet of a tree shares with the remote 
leaf the nutriment which it absorbs from the eartli, 
and the leaf shares with the rootlet that which it 
gathers from the sunlight and the air. This universal 
interdependence of parts is a primary characteristic of 
social organisms; each .member exists and labors, not 



38 THE BASIS OF ECONOMIC LAW. 

for himself, but for the whole, anci is dependent on the 
whole for remuneration. The individual man, like the 
rootlet, produces something, puts it into the circulat- 
ing system of the organism, and gets from thence that 
which his being and growth require ; he produces for 
the market, and buys from the market. Every pro- 
ducer is serving the world, and the world is serving 
every consumer. 

The analogy between society and the human body 
was familiar to the ancients. It is a discovery of re- 
cent times that a society is not merely like an organ- 
ism ; it is one in literal fact. It is a late discovery 
that social organisms develop earliest in forms corre- 
sponding, not to man, but to the lower animals. The 
same characteristics which rank an animal as high or 
low in the scale of development give a similar rank 
to a society. Social organisms, like animal forms, are 
divided into four general classes, distinguished by pre- 
cisely the same marks as those u-sed in the biological 
classification. There are social vertebrates, articulates, 
moUusks, and radiates. The distinguishing marks are, 
first, differentiation, and, secondly, cephalization, or the 
subjection of the body to the control of the brain. 
The more unlike are the parts in form and function, 
and the more the structure is subjected to the direct- 
ing influence of a thinking organ, the higher is the 
society in the scale of organic development. 

Social differentiation is division of labor, a thing 



THE BASIS OF ECONOMIC LAW. 39 

which has but a rudimentary existence in the most 
primitive tribes, which develops in the intermediate 
types, and is carried to an indefinite extent in high civ- 
ilization. In everything that can be termed a society 
a traceable degree of interdependence exists among the 
members ; and, with advancing civilization, each mem- 
ber labors less and less for himself, and more and more 
for the social whole. This is economic altruism, to the 
future development of which no limits can be assigned. 

The solidarity of society is a primary economic fact. 
Political economy treats, not merely of the wealth of 
individuals who sustain complicated relations with each 
other, but of the wealth of society as an organic unit. 
The production and the consumption of wealth by 
society will be found to embrace its whole subject. The 
world is before us with its resisting elements, the 
"thorns and thistles" of Genesis; and we subdue it, 
not by conquering each his little part, but by collec- 
tively subjugating all nature. 

Society holds two distinct relations toward every 
man ; it is the object of his efforts ; he is the object of 
its efforts. He produces for the general market; it is 
his study to ascertain a public want, and to create what 
will supply it. He buys from the general market ; he 
informs himself concerning the goods of many pro- 
ducers, and buys wherever the things offered are 
adapted in quality and price to his necessities. What 
he consumes comes from every quarter of the earth. 



40 THE BASIS OF ECONOMIC LAW. 

Society is, thus, to be regarded as one party in every 
exchange that is made in the open market. 

The social relation reacts on the nature of the indi- 
vidual. Man, the molecule of society', is transformed in 
his whole being by the unifying process of social devel- 
opment. The simple organism is made higher and 
better by becoming a part of the secondary organism. 
The changes which take place in different individuals 
vary according to the position which each assumes in 
the organic whole ; the man who, in the development of 
society, becomes a molecule of the brain of the social 
organism undergoes widely different modifications in 
his own nature from those experienced by the man who 
becomes a molecule of the nutritive organ. The sci- 
entist differs in mental and physical development from 
the hand-worker. Apart from frivolous distinctions of 
caste, there exist classes founded on differences of social 
function, and accompanied by real differences in the 
individual. 

Low organisms of every sort have few and simple 
wants. Primitive tribes, the moUusks and radiates of 
the social classification, have few wants in the aggre- 
gate, and their individual members have correspond- 
ingly few. Multiplicity of wants marks the grade of 
the society and of the individual. Simple food, little or 
no clothing, and the rudest of shelter suffice for the 
tropical savage ; nomads require more varied appli- 
ances, and the civilized man demands an indefinite 



THE BASIS OF ECONOMIC LAW. 41 

number and variety. Man, the consumer, acquires, 
thiough social development, an infinitude of conscious 
needs ; and society, in its capacity of producer, diversi- 
fies its mechanism so as to supply them all. Society, 
as a consumer, develops an infinitude of wants; and 
man, as a producer, specializes his industrial action so 
as to assist in supplying one of them. 

Closely connected with the growth of mere compli- 
cation of social structure is the growth of specific vices 
and virtues. The isolated man had no neighbors to 
rob, and none to serve ; his possibilities of evil and of 
good were limited. In the Mosaic picture the fruit, 
knowledge, the eating of which started Adam on a 
career of moral conflict, awakened in him the con- 
sciousness of liis simplest artificial and distinctively 
social want, that, namely, of clothing, and introduced 
him to a life of labor. The growing complexity of 
the economic process has been accompanied by an in- 
creasing need of moral force, and by an increasing 
amount of it in actual operation. Social relations, 
wants and want satisfactions, sins and virtues multi- 
ply in corresponding degree. Together, therefore, 
with mere altruism, the economic principle by which 
man, in self-interest, is led to work for others, there 
grows, in controlling influence, the higher altruism of 
unselfishness. Society of the highest type is not 
merely differentiated and cephalized. There is, in- 
deed, in high civilization, increasing division of labor, 



42 THE BASIS OF ECONOMIC LAW. 

and a progressive control of the social body by a think- 
ing organ ; but there exists, in as marked a degree, 
a growing subordination of brain and members to the 
dictates of moral law. This is the great and neglected 
economic fact of modern times. 

With the growth of ideal influences in society as a 
whole, comes the chief transformation in individual 
nature which is traceable to social influence. Men's 
wants are not merely multiplied ; they are spiritual- 
ized. Human desires extend themselves into scien- 
tific, sesthetic and ethical regions, and react directly 
and powerfully on the production of wealth. The 
relative strength of the animal and the ideal wants in 
different individuals is due, in part, to original endow- 
ment, and, in part, to acquirement : and this latter is 
largely the result of social influences. He whose occu- 
pation it is to do much of the thinking of society 
cultivates, perforce, his own intellectual nature ; while 
he who merely feeds or clothes it is under no such 
elevating influence, and may suffer from a powerful 
pressure in the direction of animal development. By 
specializing the economic functions of men, society 
specializes its influence on their nature. 

Every man has his scale of wants, of varying inten- 
sity. The products of social industry appeal to him 
with different degrees of power, from the food that 
sustains his life, to the trifles that minister to his 
caprices. Every man is subject to both the animal and 



THE BASIS OF ECONOMIC LAW. 43 

the spiritual desires. The most cultured is liable to 
hunger, and the rudest has some craving for knowledge 
and some appreciation of the beautiful. All have a 
sense of right. Where do the ideal wants fall in the 
scale of intensity? Does a man hunger for books some- 
what as he hungers for bread, or does he place such 
objects among the luxuries or the superfluities? On the 
answer, in each man's case, depends the influence which 
he will exert on the economic action of society. The 
kinds of wealth produced and, as we shall see, the rates 
at which they are sold are largely determined by the 
acquired natures of men as consumers. 

The lowest wants are susceptible of complete satisfac- 
tion ; the higher are indefinitely expansive. Appetite 
ceases to act when sufficient nourishment lias been, 
taken, and the sense of cold, when the body has been 
sufficiently clothed. The pleasurable sense of taste is 
capable of less complete satisfaction ; the savage eats 
long after liunger has ceased ; and, even in civilized life, 
similar phenomena are observed. In like manner, the 
desire for personal adornment causes the wardrobe to 
be increased and varied long after the need of simple 
protection has been fully met. 

Wants of this medium sort expand indefinitely, but 
decrease in intensity as the desired objects are supplied. 
Pleasures of this kind tend to cloy. The first' gratifica- 
tion is an object of intenser desire than the second, and 
the second than the following. An indefinite number 



44 THE BASIS OF ECONOMIC LAW. 

of such acquisitions would each afford some gratifica 
tion, but ill diminishing degree. 

The highest wants are not only indefinitely expansive^ 
but afford undiminished or increased gratification at 
each successive attainment of the objects of desire. 
The more a man knows, the more ardently he seeks 
knowledge and the things which secure knowledge. 
The more he enjoys of the beautiful, the more diligently 
he continues to seek it in art and nature. The better a 
man becomes, the more earnestly he strives after every- 
thing that tends to develop character. To the possible 
intensity of these supersensuous waiits there is no 
assignable limit. • A philosopher may forego the com- 
forts of life for intellectual ends ; and many men prefer 
,a life of "plain living and high thinking" to the luxu- 
ries of philistinism. The love of right action, and the 
aspiration for worthy character may subordinate every 
lower impulse. But it is not merely in cases where the 
ideal motives overshadow all others that their presence 
is felt. They are a modifying influence in every man's 
conduct, and it is to their efficiency in society as a 
whole that all progress is due. 

These ideal wants are all unselfish. The true and 
the beautiful are desired each for its own sake, and 
the desire for personal worthiness opposes self-interest 
as an equal antagonist. Under the influence of such 
motives, man can never be a being striving solely for 
personal advantage, and society can never be wholly 



THE BASIS OF ECO^'OMIC LAW. 46 

given over to an ignoble scramble for profit. These 
motives, of course, find no place in a system of econom- 
ics based on selfishness. At best they receive from 
such a science a slighting recognition, as " disturbing 
elements." Can such a system be maintained? Is 
logic on its side, and is the opposition to it a matter 
of sentiment? Do the hard facts of life sustain the 
economic science which dehumanizes its subject? We 
shall try to definitely answer these questions in later 
chapters. The unselfish forces of society are doing 
practical work. They create the altruism which gives 
without return. It is not do id des, but simply do, 
where they are in control. They have filled the land 
with schools, churches, art museums, hospitals and 
numberless non-mercantile agencies for social improve- 
ment. 1 hey have diverted vast amounts of wealth 
into ways of which no account can be taken in a sys- 
tem based on self-interest and limited to the field of 
competition. They have, as we shall see, created a 
practical department of non-competitive economics, 
and are constantly enlarging its sphere by encroach- 
ments on the field where competition rules. If the 
extreme and narrow view be taken that wealth in 
process of disbursement is beyond the limits of eco- 
nomic study, this objection may be met upon its own 
ground. It may be shown that the market' itself is 
permeated by moral influences, and that the competi- 
tive principle, instead of being supreme and resistless, 



46 THE BASIS OF ECONOMIC LAW. 

exists at best by sufferance, is subject to constantly 
narrowing restrictions, and is liable, in particular 
forms, to be totally suppressed by the action of that 
moral force which is, in reality, supreme. 

A want that is universal and insatiable is the desire 
for personal esteem. It is a main spring of the ener- 
getic action on which the accumulation of wealth de- 
pends. It adjusts itself, in quality, to different natures, 
becoming low vanity or worthy ambition for public 
favor, according to the weakness or the strength of 
particular intellects. All men value their standing 
in the community, though they take different ways 
to secure it. It is this desire, in the main, that sets 
for each class a standard of living, and prompts them 
to effort to maintain it. It tends powerfully to ele- 
vate the condition of the poor, and is a main reliance 
of Malthusianism for the counteracting of that ten- 
dency to multiply in number which, if unchecked, 
would depress to the point of extreme hardship 
the condition of the laboring class. It is a chief 
incentive to the prodigal expenditures of the very 
wealthy ; and at the same time, it impels to the ac- 
cumulations which make large expenditures possible. 
It creates a limitless market for articles of decoration, 
and thus assists in giving a stable value to the pre- 
cious metals, which are the basis of currency. Changes 
in the supply of whatever ministers to vanity are 
neutralized, in part, by the elasticity of the demand. 



THE BASIS OF ECONOMIC LAW. 47 

This desire is the basis of fasliiuii, and, in this field of 
action, dominates the production of all form utilities 
into which an sesthetic element enters. Consumers 
and producers pay attention to its despotic dictates, 
since what is most saleable to-day may, by its influence, 
become a drug to-morrow. 

That which most concerns us, in connection with this 
powerful economic force, is its action in supplementing 
the ideal motives of human nature. It counterfeits 
taste, intellect, and virtue where they have small exist- 
ence. It causes low natures to resemble higher ones 
in their outward action, and elevates the general con- 
duct of society toward the standard set by its best 
members. The newly made millionaire with no taste 
for art becomes a purchaser of paintings, meritorious or 
otherwise, according to his tact in utilizing the judgment 
of others in the selection. He fills his library with 
volumes ordered, possibly, according to shelf-room, by 
the linear foot independently of contents. In the ac- 
quisition of wealth the man whom virtue would not 
deter from fraud or robbery curbs his impulses from the 
love of commercial reputation. Mercantile honor has 
its roots in genuine morality; but its visible effects are 
multiplied by the love of personal esteem. 

This desire not only counterfeits virtue in natures 
where it is lacking ; it cooperates with it where it exists 
in full measure. The benevolence which founds col- 
leges and hospitals is called out, in part, by tlicir 



48 THE BASIS or ECONOMIC LAW. 

monument-making character. There is much in the 
name of a public institution. Yet the philanthropy 
which disburses fortunes is not more assisted by this 
worthy love of esteem than is the virtue which guards 
men from contamination during the process of acquir- 
ing fortunes. 

In the last analysis the sense of right in men is a 
supreme motive, in the market as elsewhere. It is the 
centripetal force in economic society. Its action is not 
an occasional or "disturbing " influence; it is constant, 
and increases with time and civilization. If classed as 
a disturbing force, it promises eventually to overshadow 
those classed as normal. There is, in fact, nothing 
whatever of a disturbing nature about this motive ; its 
whole action tends to harmony. It is the one possible 
means of realizing, in practice, those " economic harmo- 
nies " which Messrs. Gary and Bastiat have thought 
they perceived in the unrestrained action of selfish 
motives. " Every man for himself " is the principle of 
disorganization and chaos ; " every man for mankind " 
is the principle of organic unity. The more the action 
of such motives increases, the more harmoniously and 
rapidly will social development proceed, and the more 
speedily will the highest activities of the individual man 
be called forth. Such motives demand the first atten- 
tion and the profoundest investigation. A truly scien- 
tific study of their action will afford the key to a 
political economy that shall explain the facts of man's 



THE BASIS OF ECONOMIC LAW. 49 

present life, and give promise of a future that shall 
answer the cravings of his nature. 

The wants of men are either latent or developed, 
according to their own intellectual condition, and ac- 
cording to the grade of culture of the society to which 
they belong. The ignorant man in a civilized state, and 
the primitive tribe as a whole, have, at best, but a latent 
desire for literature. Wants, when developed, admit of 
three distinct conditions, according to the possibility of 
gratifying them. The desire for what is decidedly 
beyond the possibility of attainment is not, in a healthy 
nature, either constant or active. The peasant passes 
the palace with indifference, and experiences, at most, a 
desultory and transient wish to be its occupant. Such 
a wish is a day-dream ; it stimulates to no effort, and its 
non-fulfilment occasions little discontent. In passing a 
dwelling slightly better than his own the laborer may 
experience a desire of a different and more effective 
character. The desire for that which is attainable by 
effort is active, and stimulates to exertion in pursuit of 
the object. Failure in such a quest occasions lively 
disappointment. When the object has been attained, 
the want of it ceases, and the active desires extend them- 
selves to remoter objects. 

Wants admit of these three conditions ; they are 
quiescent when the object of desire is unattainable, 
active when it is attainable, and in a different mmnier 
quiescent when it is attained. The first coudition is 



50 THE BASIS OF ECONOMIC LAW. 

necessary to contentment, the second to ambition, and 
the third to tranquil enjoyment. Contentment, ambi- 
tion, and tranquil enjoyment are not inconsistent with 
each other; but, on the contrary, the coexistence of 
these three mental states is the natural and healthy 
condition of the mind. Despondency sometimes ex- 
ists in fact, as other unhealthy conditions exist; but 
it is not, in active life, the prevailing state. In a 
community ordinarily prosperous men tend to con- 
tentment, hopefulness, and enjoyment, and the oppo- 
site conditions are the exceptions. 

When combined with contentment, ambition fur- 
nishes the condition of healthy economic progress; 
without it, it is an element of danger. A low grade 
of contentment without ambition is the cause of the 
security of caste-ruled despotisms. The safety of re- 
publics especially demands that, where this passion 
exists, its development should be normal, that it should 
strive after what is legitimately within reach and resign 
what is beyond. It acts in this manner wherever 
wealth is well distributed by a natural process, and 
where the. social system is not regarded as unsettled 
and subject to change. Where wealth is ill dis' 
tributed, and where the permanence of the social 
system seems questionable, there are the conditions 
of an abnormal ambition which is an element of 
peril. 

The mere possibility of revolution is a vitiating ele« 



THE BASIS OF ECONOMIC LAW. 51 

ment in the mental processes of men. It brings indefi- 
nite gains seemingly within the limits of attainment, 
and undermines contentment. It renders those ab- 
normal gains independent of labor, and palsies the 
productive energies. It substitutes an eager and 
hungry waiting for spoils for the healthy desire to 
earn and to save wealth. It is the basis of deadly 
enmity between social classes. The natural union of 
contentment, hopefulness and tranquil enjoyment is 
general only in those societies, the stability of which 
is assured, and the industrial condition of which affords 
to members of every class the opportunity for at least 
a small amount of progress. The lazy and the improv- 
ident may even then repine ; but these are never a ma- 
jority. For this reason a republic among whose people 
communistic poison has begun its work should cling, as 
a ship clings to its anchor, to whatever opens a door of 
possible progress to the laboring class. It should give 
more than a tolerant hearing to the theories of cooper- 
ation and profit-sharing, and should forgive many fail- 
ures before rejecting them in practice. It should 
treasure moral influences and everything that sup- 
plements their action. 

The leading English writers on political economy 
have introduced a distinction between so-called "pro- 
ductive and unproductive consumption," the former 
being the consumption of those things, the effect of 
which is to enable a man to labor, and the latter, the 



62 THE BASIS OF ECONOMIC LAW. 

consumption of things which give simple gratification 
without imparting laboring capacity. This distinc- 
tion is of interest from the high authority on which 
it rests, and from the important question which it is 
sought to solve by its use. The economic effects of 
luxury and of frugality are the real questions at issue 
in the discussion of what is termed productive and 
unproductive consumption. Mr. Mill conveys the im- 
pression of taking peculiar pleasure in this distinction, 
and of conceiving that important light has been gained 
by its use. 

It is doubtless true that the employment of this 
distinction for the purpose indicated is unnecessary, 
and that it involves some confusion of thought. Pro- 
fuse expenditure differs from frugal living, not in 
producing less wealth, but in destroying more. In 
itself consumption is never productive, but is usually 
more or less destructive. A certain kind of consump- 
tion is supposed, by its reaction upon the energies of 
man, to result in a subsequent creation of wealth. 

It would doubtless be conceded by those who use 
this distinction that it is impossible to rigidly apply 
it in actual life. To draw a line between that which, 
when consumed, gives capacity for labor, and that 
which does not, is impracticable. Comforts, as well 
as necessities, may increase the ability to work, and 
necessities, as well as comforts, may give gratification. 
The food of nearly every man satisfies wants higher 



THE BASIS OF ECONOMIC LAW. 53 

ill the scale than that of simple nourishment; it gives a 
sensuous gratification distinct from its nutritive action. 
The clothing of every one above destitution satisfies 
higher wants than those of warmth and protection, 
those, namely, of personal adornment and of social con- 
sideration. So witli the dwelling, and the entire sur- 
roundings. It is impossible to say that food, clothing, 
and shelter are productively consumed, or even that 
distinguishable portions of them are so. 

To consume only productively one must eat the 
cheapest food that will adequately nourish, wear the 
simplest clothing that will completely protect, and 
live in the rudest dwelling that will fully shelter. 
All liigher wants must remain unsatisfied, and the man 
must become a machine, content with the fuel that 
keeps him in motion. Here is the chief weakness of 
the classification, and the reason for mentioning it in 
this connection ; — to make a man a machine is to 
make him anything but productive. 

That such a result can never be realized in fact is self- 
evident ; that it should ever be conceived of in thought 
is an evidence of how little trouble even the greatest 
writers on political economy have given themselves con- 
cerning the real nature of the being with whose actions 
they deal. If the laborer is an engine, his motive power 
is fuel ; if he is a man, his motive power is hope. It is 
psychological rather than physiological forces which 
keep him in motion. His will, and not merely his 



54 THE BASIS OP ECONOMIC LAW. 

muscle, is an economic agent, and he is to be lured, not 
pushed, in the way of productive effort. Ambition may 
have feeble sway in individual cases, but, this side of 
the gate of Dante's Inferno, it is never entirely extinct. 

We have seen that wants on the margin of actual 
possession are the active incentives to effort. Civilized 
man struggles no longer for existence, but for progres- 
sive comfort and enjoyment. It is the hope of small 
and legitimate gains which makes general contentment 
possible; the absence of it breeds a sullen submission to 
hardship, tempered, in many cases, by dreams of com- 
munistic plunder. 

Progress has limits, and many wants must remain 
forever unsatisfied. By a kindly provision of human 
nature, such wants are generally quiescent. Other 
wants near to the border line of actual possession must 
be active, with a prospect of satisfaction by effort, if 
happiness is to be attained. It is the want of things 
which lie far above the line of necessities, and the con- 
sumption of which would be classed as unproductive, 
which is the constant motive power in industrial prog- 
ress. The comforts to be enjoyed to-morrow set in 
action the muscular energy gained by the food con- 
sumed to-day. It is the so-called " unproductive con- 
sumption " which, if soul forces be recognized, is 
productive of wealth. 

The ultimate foundations of political economy lie 
deeper than the strata on which existing systems have 



THE BASIS OF ECONOMIC LAW. 65 

been reared. The point of divergence between the 
present science and the true science lies farther back 
than ordinary inquiries extend. The economist of the 
future mnst begin at the beginning of all knowledge, 
and, with Socrates, pass through the portal from which 
diverge the various walks of scientific inquiry, and over 
which the master has written " yvcodt aeavTov." Self- 
knowledge is the beginning of every science ; but it is a 
peculiarly comprehensive self-knowledge that is the 
basis of the coming economic system. Knowledge of 
men is the beginning of this science ; knowledge of the 
social organism of which men are members is the middle 
and the end of it. Individual desires are molecular 
forces in the general life of society, and to them all 
phenomena of wealth must be ultimately traced. It is 
by a deeper analysis than has been dreamed of in our 
philosophy that we may hope to attain that higher 
insight, that knowledge first of man, and then of 
humanity, which is the basis of true economics. 



CHAPTER IV. 

THE ELEMENTS OF SOCIAL SERVICE. 

Men are altruistic in their economic action ; society 
is egoistic. Men work for each other ; society works 
for itself. For many purposes the most available con- 
ception of the entire economic process is that of the 
social organism as a producer, laboring to serve each 
individual member as a consumer. 

Wealth is the means by which society serves its 
members. Resolving social service into effort and 
gratification, we find, as in our former analysis, an 
outward and material connecting link between them. 
One man's effort gratifies another man through the 
medium of some specific product ; the effort of society 
gratifies all its members through the medium of all 
products. Serving is creating social wealth, and being 
served consists in consuming it. 

Production and consumption, the primary elements 
of social service, are the reverse of each other in every 
particular. Man acts on nature in the one process ; 
nature on man in the other. Utilities come into exist- 
ence through the sacrifices of men, and, as a rule, pass 
out of existence in the process of promoting their 
welfare. 



THE ELEMENTS OF SOCIAL SERVICE. 57 

Consumption is utilization, and the destruction of 
the object consumed is, in most cases, an unhappy 
attendant circumstance of the process. It is not its 
essential element; most utilities are of such a nature 
that they exhaust themselves, slowly or rapidl}-, as the 
case may be, in producing their effect on men. Yet 
one form of wealth, land, which is not created by 
labor, is not destroyed in utilization. It may be im- 
proved or injured to an indefinite extent ; utilities may 
be added to it or taken from it ; but to create or to 
destroy space on the surface of the earth is beyond 
human power. The primary service rendered by land is 
that of affording standing ground and travelling room ; 
although in nearly every locality short of the poles 
or the deep sea, it has an ultimate capacity to become 
a food producer. A man utilizes or consumes land 
when he stands on it or drives across it. He consumes 
a mountain when he causes it to lift him a thousand 
feet into the air, and to afford a view of the river valley. 
In another way he consumes the valley itself by look- 
ing upon it and enjoying its beauty. The attractions 
of a landscape are utilities, and to enable them to 
produce their effect on the human sensibility is one 
mode of consumption. 

Wealth is commonly and accurately termed "means"; 
utilization is the end to which it corresponds. Maxi- 
mum utilization is th6 goal of the economic process, 
the snmmum honum of social economy. The mere 



58 THE ELEMENTS OF SOCIAL SERVICE. 

quantitative increase of wealth is, indeed, a factor in 
that result; but it is one factor only. The greatest 
social wealth does not necessarily create the greatest 
social weal; that result depends, in a great degree, 
on the quality and the distribution of the weal-con- 
stituting element. The securing of the greatest quan- 
tity, the highest quality, and the most equitable dis- 
tribution of wealth is the rational goal of economic 
society. How much this involves we shall later see. 

In a loose sense production and consumption over- 
lap each other in time ; in a more accurate sense they 
are completely distinct, and the terminal point of the 
one process marks the initial point of the other. The 
difference lies in the two uses of the word consump- 
tion. 

The desire for a useful object induces a secondary 
desire for whatever may become a means of securing 
it. The need of a dwelling for shelter induces a sec- 
ondary desire for the stone, brick, and lumber that 
will compose it, and, again, for the trees that will 
furnish the lumber, the quarries that will furnish the 
stone, etc. If the gratification of these mediate wants 
be regarded as a subordinate variety of utilization, 
tlien production and consumption are jointly in prog- 
ress in most industrial operations. The utilizing of 
trees is the production of lumber, and that of lumber 
is the production of houses. The ultimate end is the 
direct gratification of a want of man's nature. Pro- 



THE ELEMENTS OF SOCIAL SERVICE. 59 

ductioii continues till that goal is reached; final utili- 
zation, or true consumption begins at that point; but 
secondary consumption may be traced backward through 
all the steps by which the goal is approached. Every 
step that brings us nearer to the end satisfies a mediate 
desire. It may not be illogical to apply the term con- 
sumption, as is commonly done, to this secondary utili- 
zation ; but it is illogical to fail to distinguish its 
peculiar quality, and to neglect to use a qualifying ad- 
jective to mark the distinction. Consumption in the 
full sense is that final utilization which is distinct from 
production in time, and the opposite of it in quality. 

In this use of terms the production carried on by 
society as an organic whole includes the process of 
exchange, and involves that of distribution. The 
four traditional divisions of economic science are not 
distinct and coordinate. In the very act of complet- 
ing a product society passes it many times from hand 
to hand. One producer, or group of producers digs ore, 
another smelts it, another rolls the metal, another cuts 
it, with the result that society has produced, perhaps, a 
i keg of nails. Each step in the process has involved a 
' transfer of products, and the end is marked by an 
exchange of a different kind. In this last exchange 
the act by which society disposes of a product com- 
pleted and ready for final utilization may be regarded 
as the terminal act of social production. The acquir- 



60 THE ELEMENTS OE SOCIAL SERVICE. 

ing of that product by the user may, in like manner, 
be classed as the initial act of consumption. 

Division of labor specializes man's productive action 
in two ways. There is, first, a broadly qualitative divi- 
sion of labor, which assigns to an extensive group of 
producers the creation of a single complete product, 
like the keg of nails above referred to. A subdivision 
assigns each of the general steps in the process to a 
subordinate group. Mining, smelting, rolling, and cut- 
ting are performed by specialists, who, in each case, 
give to the material the particular transformation 
which they have learned to impart, and pass it to the 
next workers in the series. " Touch and pass on " is 
the social order ; and each transformation adds to the 
material a particular increment of utility, a sub-prod- 
uct, as we shall later have occasion to term it. The 
creation by society of any complete product involves 
a series of exchanges between the producers of the 
sub-products; and these transfers are integral parts 
of the general productive operation. 

Where several distinct operations are performed in a 
single manufacturing establishment, there are, of course, 
no exchanges between the groups of workmen who per- 
form them. Spinning, weaving, and dyeing are mechan- 
ically distinct processes ; but spinners in a mill do not 
sell their product to the weavers, and these, again, to 
the dyers. Yet sales do, in effect, take place here. 
These sales are unique in quality, and stand in a direct 



THE ELEMENTS OF SOCIAL SERVICE. 61 

relation to distribution. The sellers are all the Avork- 
men ; the only buyers are the employers, and the result 
of the sale is a division between these parties of the 
value which the mill creates. The full discussion of 
this transaction is reserved for the chapter on wages. 

Logically exchange and distribution ai'e distinct from 
each other ; practically they are merged. The same 
series of acts })erforms both functions. Exchanges are 
specific transactions between individuals ; distribution 
is a general process performed by society as a whole. 
It is a division of the income of society among its mem- 
bers, and is effected by means of all the interchanges of 
products which take place between individuals. 

As ordinarily defined, exchange and distribution are 
not even logically distinct. Scientific treatment de- 
mands that the logical separation, at least, shall be 
maintained; and it may be so by rational definitions. 
Exchange is a qualitative diffusion of wealth ; distribu- 
tion is a quantitative diffusion. Exchanges determine 
in what concrete things a man's wealth shall embody 
itself; distribution determines how much of that wealtli, 
in abstract quantity, there shall be. If a farmer, having 
surplus wheat, sells it for an equivalent in clothing and 
implements, his wealth changes its form of embodiment, 
but not its amount. His assets acquire a new character 
by his visit to the market, but the inventory ■ shows the 
same sum total as before. 

Yet there is something in the sales constantly going 



62 THE ELEMENTS OF SOCIAL SERVICE. 

on in society which has the effect of determining what 
commodities are to be regarded as, in abstract value, the 
equivalents of each other. This influence has assigned 
to the farmer's wheat a certain purchasing power, fixed 
the quantity of clothing and implements which he can 
get for it, and, by this means, determined his share in 
tlie general wealth of society. This determining influ- 
ence is the adjustment of ratios of exchange in the 
general market. 

An exchange involves, first, a bargain, and secondly, 
a double transfer of commodities. The bargain in- 
volved in the transfer is not a part of it. The fixing 
of the rate at which two commodities shall be ex- 
changed is antecedent to the act which changes the 
ownership of the articles. The fixing of a rate of 
exchange is an act in social distribution, while the 
double transfer of the commodities themselves is all 
that, in the last analysis, there is in the process of 
exchange. The establishment of market prices for 
everything determines every producer's share in the 
varied results of social industry, and, as already 
stated, is identical with the process of social dis- 
tribution. If the fixing of rates be not, in the dis- 
cussion, kept sharply distinct from the mere change 
of ownership of the commodities themselves, then the 
term exchange can have no definiteness of meaning. 
If the distinction be made, and if the term be applied 
to the rate-adjusting operation, it becomes the name 



THE ELExMENTS OF SOCIAL SERVICE. 63 

of the transaction by means of which society as a 
whole divides its income. Exchange in general means, 
thus, distribution analyzed into its ultimate acts, and 
regarded from an individualistic point of view. 

In the strict use of terms an exchange reduces 
itself to a double alienation and a double acquisi- 
tion of concrete commodities. "I give," "I take," — 
acts of will made known in the briefest speech, are 
the essence of the double transfer. These acts re- 
quire but an instant of time, and no effort but that 
of communicating the result. Time may have been 
consumed in reaching a decision, and effort in ad- 
justing terms. That part of the conversation between 
a buyer and a seller which consists in discussing the 
quality of goods has in view an adaptation of prod- 
ucts to the needs and tastes of a consumer. It 
resolves potential utilities into actual ones. It causes 
an article which is capable of rendering a service to 
actually render it to the user, and is a part of the 
general process of mercantile production. 

We shall consider later the fact that actual exchanges 
are not always for equivalents, and shall endeavor to 
place in its proper category that margin of illegiti- 
mate profit which a shrewd trader may make both in 
buying and in selling. He who parts with ten units 
of value and receives twenty accomplishes, in fact, an 
exchange, and a fraud or a robbery besides. 

The bargaining processes which determine the selling 



64 THE ELEMENTS OF SOCIAL SERVICE. 

price of finished products in the market stand in a less 
direct relation to distribution than do those which 
adjust wages ; the latter divide a value between em- 
ployers and employed. Wages are, as we shall demon- 
strate, payments for a certain kind of product ; the 
agreement to work for an employer is a contract on the 
laborer's part to sell his future interest in the product 
which his labor will assist in creating. The man who 
agrees to run a sewing-machine in a shoe manufactory 
contracts, in effect, to acquire and to sell an undivided 
share in the shoes. This bargain determines the return 
of his labor more directly, though not more really, than 
the later transactions which determine the value of the 
shoes as completed and offered in the market. 

The primary elements of social service are, then, the 
production and the consumption of Avealth by the social 
organism as a whole. Exchanges, or double transfers of 
commodities, are integral parts of social production. 
The adjustment of rates of exchange constitutes, in the 
aggregate, the process of distribution. This is a divid- 
ing of wealth, in abstract quantit}', among individuals, 
and is incidental to production and consumjDtion by 
society. 

Competition is a term commonly made to include the 
entire process of adjusting rates of exchange, and thus 
of determining distribution. It is described as a war- 
fare, and when looked at in its entirety, presents, in 
fact, the semblance of an indiscriminate ynelee, in which 



THE ELEMENTS OF SOCIAL SERVICE. 65 

the element of strife predominates. It is not, however, 
a blind contest ; there is a method in it, the analysis of 
which is as important as any study in practical eco- 
nomics. Strife is increasing in our times because true 
competition is diminishing. That which was the basis 
of Ricardian economics is slowly passing out of existence 
at points where its presence is most needed, leaving 
society in a condition anomalous, full of peril, and 
demanding a prompt recourse to a new principle of 
adjustment in the distributing of the rewards of in- 
dustry. 

What is loosely termed competition consists, first, of 
a rivalry for public favor, resembling, not a battle, but 
a race ; and, secondly, of a bargaining process having the 
capacity to become a quasi-combat. The former ele- 
ment only is true competition, and, where it is present, 
it affects the contest which follows, and takes the 
greater part of the belligerency out of it. 

Ten men offer similar articles in the market, and we 
buy from one of them ; but we have no words with him. 
If he demands too much, we shall buy from another; he 
knows this, and the knoAvledge forestalls the excessive 
demand. The tacit recognition of the presence of 
several buyers, on the one hand, and of several sellers, 
on the other, is a substitute for much argument. In 
retail traffic bargains are made with a minimum of 
"higgling" ; the competition preceding actual purchases 
takes away the root of strife. 



66 THE ELEMENTS OF SOCIAL SERVICE. 

It is where the efforts of rivals to outdo each othei 
ill serving the pubhc are wanting that strife ensues. 
Without the steadying effect of true competition a 
bargain becomes a contest of strength in which one 
man's gain is another man's loss, a transaction which 
is liable to strain the personal relations of the partici- 
pants, and even to render them surly or desperate, in 
cases where vital interests are involved. The deter- 
mining influences in such crude adjustments of value 
are shrewdness and ultimate endurance ; and a man 
does not take a defeat by either method with equa- 
nimity. Still less do classes of men do so when the 
issue determines their means of livelihood and comfort. 

Such is coming to be the situation in the relations 
of capital and labor. A contest is here in process on 
a scale of magnitude impossible in earlier times, a 
battle in which organized classes act as units on the 
respective sides. The solidarity of labor on the one 
hand, and of capital on the other, is the great economic 
fact of the present day ; and this growing solidarity is 
carrying us rapidly towards a condition in which all 
the laborers in a particular trade and all the capitalists 
in that trade, acting, in each case, as one man, will 
engage in a blind struggle which, without arbitration, 
can only be decided by the crudest force and endur- 
ance. The strained relations of the parties in the 
contest, the surliness and desperation, the threatenings 
of literal war, are already the phenomena of it. The 



THE ELEMENTS OF SOCIAL SEKVICP:. 67 

essential peril to society lies in no superficial features, 
such as rifle-clubs and dynamite laboratories, but in 
the fundamental change that has taken place in the 
economic relations of the parties. The competitive 
principle has been vitiated. The strife-allaying ele- 
ment, the healthy rivalry on either side, has yielded 
to solidarity, which is rapidly growing. Already the 
hope is openly expressed of such a union of all labor 
that a universal strike may become possible if not 
actual. 

To what, then, is a system once supposed to be 
nothing if not competitive actually tending? To the 
annihilation of competition at the point wliere its strife- 
allaying action is most needed. The rivalry between 
large producers and small ones has centralized capital, 
and substituted production by a few great firms and 
corporations for that which was formerlj' carried on 
in numberless little shops. The reduction of the num- 
ber of establishments has made producers' unions pos- 
sible, effecting monopolies in many directions, and thus 
partially destroying that variety of competition which 
formerly fixed the prices of completed products in the 
market. The aggregations of capital have given a one- 
sided character to transactions between employers and 
employed. A corporation owning a village, and with 
no present competitor, must hold at great disadvantage 
a thousand laborers who, in dull times, underbid each 
other for employment. Under such circumstances 



68 THE ELEMENTS OP SOCIAL SERVICE. 

Cobden's fcwmula for a rise of wages, "two bosses 
after one man," could scarcely be realized; but his 
formula for a fall of wages, "two men after one boss," 
would describe a somewhat constant condition. Indeed, 
could the supposed case become actual, could the com- 
petition of capitalists in other villages be completely 
excluded, and could all unions of laborers be prevented, 
then wages might perhaps be adjusted according to 
a formula which barons under the feudal system em- 
ployed in dealing with their subjects; they might be 
gauged " ad misericordiam,^^ according to the dictates 
of a compassion which, in a corporation, might or might 
not exist. 

The supposed case is a highly ideal one. Competi- 
tion on the employers' part has never been excluded; 
and on the other hand labor unions have long been 
actively at work. With the tendency to consolidation 
on the side of capital, such unions become inevitable 
and right. Yet they oppose to the solidarity of capi- 
tal a solidarity of labor, make wage adjustments to be 
bargains between two parties without rivalry on either 
side, and threaten to introduce into the industrial sys- 
tem an element of strife for which there is no analogy 
in anything which appears in a system truly competi- 
tive, and which, for possible brutality, may perhaps 
be accurately likened to a club contest of two cave- 
dwelling men. It is Ricardianism, the competitive 
system duly "let alone," the natural action of self-in- 



THE ELHiMENTS OF SOCIAL SERVICE. 69 

terest in men, that has brought us face to face with 
this condition. 

Can an organic unity grow out of a principle of strife? 
The answer is obvious ; and the inference is that com- 
l)etition, as it has existed, is not a principle of strife. 
Distribution by a bargaining process without true com- 
petition is something by which no society could have 
developed. The general adoption of this method no 
society can survive. The strife already created by it is 
rending the social organism, and would ultimately de- 
stroy it but for one redeeming fact, — the certain advent 
of a new principle of distribution. This social force is 
new only in its mode of operation ; fundamentally it is 
the same moral force that, when the competitive system 
was at its best, was, in reality, supreme in the economic 
life of men. We shall examine its working in the fol- 
lowing chapters, a study which must begin with an 
analysis of the nature of Value, and of the laws that 
govern ratios of exchange in the general market. 



CHAPTER V. 

THE THEORY OF VALUE. 

The charm of novelty, at least, should attach to a 
philosophy of value, provided only that it prove to 
be the true one ; for it is certain that in all that has 
been written on this much elucidated theme, a state- 
ment of the rear nature of the thing discussed is not 
to be found. One cause of this marked deficiency is 
to be sought in the incomprehensive view which writ- 
ers have taken. The great fact that society is an 
organic unit has been, for the time, forgotten, and 
the attention has been fixed on individuals and their 
separate and intricate actions in valuing and exchang- 
ing commodities. It is as though the physiologist, 
instead of studying the human body as a whole, were 
to confine his attention to the microscopic activities 
of the separate molecules that compose it. Intricate 
and nearly profitless would be such a study, and far 
too intricate and profitless has been the study of the 
department of social physiology comprehended under 
the theory of value. This subject can never be 
grasped and understood until the organic whole is 
made the primary object of attention. The value 
theory must receive the benefit of late studies in 



THE THEORY OF VALUE. 71 

social science. The conception of society as au or- 
ganism must be applied to this question, which, of all 
questions of political economy, is most dependent on 
the comprehensive view thus gained. Then only will 
our theories cease to lose themselves in the intjicate 
tracing of individual activities, which is only social 
microscoj^y. 

Who has not learned to his sorrow, how unsatisfy- 
ing, in fact, are such discussions of value as claim to 
be particularly scientific, and how large a mass of 
literature he may patiently read through without sat- 
isfying himself exactly what value is ? Aside even 
from its want of comprehensiveness, the reader will 
find the prevailing mode of discussion leading to 
specific difficulties and contradictions, from which he 
would give much to be delivered. He will learn 
that utility has something to do with value, that it 
is, indeed, included in the popular meaning of the 
word ; but he will be enjoined to break Avith this 
popular notion, and, in science, to limit the meaning 
of the general term to something formerly called 
value in exchange. Yet, while encouraged to inter- 
pose as wide a gulf as is possible between value pro- 
per and utility, the reader will, on the other hand, 
find that he is allowed to confound utility with some- 
thing once termed value in use. He will find that 
definitions are attempted of the two varieties of 
value, separately considered ; but he may search 



72 THE THEORY OF VALUE. 

economic literature in vain for a satisfactory formula 
for value in the generic. What value is, vk^hether 
in use or exchange, few have attempted to tell us 
at all, and none have told us in a manner that is 
clear and satisfying. 

Yet who supposes that a universal popular idea is 
baseless ? Who would claim that the subtle intui- 
tions that determine the ordinary use of terms are 
not a guide to scientific truth ? If men continue, in 
spite of instructions, to use one term where the econo- 
mist uses two, it is evidence that, in some way, the 
thing signified must be generically one ; that there 
is, in the seemingly dual idea, a unity which the 
scientist has not as yet grasped. If the notion of 
utility, of usefulness, persists in attaching itself to 
the word value, whenever used in common speech, 
it is certain that there is a closer connection between 
them than has yet been detected. Latin valeo, French 
valeicr, English value, as well as other foreign syno- 
nymes, all include the idea of usefulness, whatever else 
they may signify; and a formula that will harmonize 
with this permanent usage, and express the mean- 
ing of the term in any connection, is what the mind 
instinctively craves. 

With due apology for the audacity of the attempt, 
and a consciousness of its difficulty, I am about to 
hazard the effort to obtain a comprehensive view of 
value, and to formulate a definition that shall express 



THE THEOItY OF VALUE. 73 

the fundamental thought which is present whenever 
the term is used. Instead of finding that utility is 
something necessary, indeed, to the existence of value, 
but not included in its proper meaning, something 
which we must drop out of mind as we become very 
scientific, we shall find that utility and value are in- 
separably bound in thought, and that the attempt to 
dissociate them betrays a failure on the part of the 
scientist to follow, witli his analysis, the subtle mental 
processes that have determined the popular mode of 
expression, and given the public a truer notion of 
value than science has yet attained. 

Value is an abstract term, and analysis will show 
that the abstraction is not a primary one. The notion 
is not formed by fixing the thought exclusively on 
one of the qualities that make up our conception of 
some concrete thing. Such a process may be termed 
a primary abstraction. The resulting notion, the 
quality itself, may become the basis of a secondary or 
higher abstraction. The quality may have attributes, 
and one of these may be made the object of thought. 
As the primary process gave us an attribute of a con- 
crete thing, the secondary process gives us an attri- 
bute of an attribute. Certain things are useful, and 
a primary act of abstraction presents to the mind the 
quality, utility. This quality may exist in' different 
degrees ; some things are more useful than others. 
To determine how useful a thing is, is to measure its 



74 THE THEORY OF VALUE. 

utility. Quantitative measure, then, is an attribute 
of the quality, utility. The fixing of the thought 
exclusively on this attribute is the secondary process 
of abstraction ; it gives us the notion, measure of 
utility, and it is this that I propose maintaining as 
the true formula for value in the generic. Value is 
■quantitative measure of utility. Always and every- 
where there is present to the mind that makes a val- 
uation, whether for use or exchange, the conception 
of a concrete thing, of a quality of that thing, and of 
the quantitative measure of that quality. 

Value and utility are, therefore, as inseparable as a 
measure and that which is measured. The concep- 
tion of linear extension could be as logically separated 
from the conception of a geographical mile, as the idea 
of utility from that of value. 

On the other hand, value and utility are no more to 
be confounded with one another than separated; two 
inseparable things are not one thing. A measure and 
that which is measured are not identical. The metal 
lying on the scales possesses the quality, weight ; that 
general quality is not identical with the fact that the 
weight amounts to just a hundred pounds. The 
quality is not to be confounded with the quantity of 
the quality. Utility is nevier identical with value, 
either in use or exchange. 

Still less is value to be confounded with the expres- 
sion for it; that would be confusing the result of a 



THE THEORY OF VALUE. 75 

measurement Avith the object used by the measurer 
to convey that result tu another mind. A unit of 
linear extension is not identical with a foot-rule, nor 
a unit of weight, with a metal disc that weighs a 
pound. Place a quantity of nails on one arm of the 
scales, and a metal disc on the other. The scales 
swing freely; the nails are weighed. Are we in dan- 
ger of saying that the metal disc is the weight of the 
nails ? We say that two weights are equal. There 
is a common quality in two objects, and the measure 
of that quality is the same in both. Unless very un- 
discriminating, we shall not say that a metal disc of 
smaller and finer sort, a dime, for instance, is the 
value of the nails. There is a quality common to 
nails and disc, and the measure of that quality is the 
same in both. 

We need to pause but a moment to distinguish value 
from price ; the latter is a mode of expressing value. 
All measurements are expressed by comparisons. In 
the rude beginnings of mensuration there is no unit 
of linear extension, and the length of an object is 
vaguely expressed in terms of anything that chances 
to be near it. When a common unit is adopted, say 
the length of a human foot of rather prehistoric pro- 
portions, measurements are expressed in terms of that 
common standard. Extension is the same', whether 
expressed in vague general comparisons, or in feet 
and inches. Values are expressed in vague general 



76 THE THEORY OF VALUE. 

comparisons until the adoption of a unit for ineasui'- 
ing utility; utility is the same whether expressed in 
the ruder or the more accurate way. Measure of 
utility expressed in terms of a conventional unit is 
price. 

If the essential distinctions have now been clearly 
made ; if concrete things, a quality of those things, the 
measure of that quality and the conventional expres- 
sion for that measure are each so distinct from all the 
others that there is no danger of confusing them, we 
are prepared to advance to the essential argument, 
and prove, if possible, that value is, in fact, always a 
measure of utility. For it occurs to us at the outset 
— and, if it did not, any text-book of political economy 
would remind us — that things having widely differ- 
ent degrees of apparent utility have the same value 
in the market. We remember the diamond and the 
water of Adam Smith's illustration, and his assertion, 
true in spite of criticism, that the gem, the costliest of 
articles, satisfies a want much less intense than that 
satisfied by the water, which costs little or nothing. 
Is our theory stranded at the outset? 

We must now make a distinction which, so fur as I 
am aware, has never before been applied in political 
economy,* but one which, as I hope to show, is abso- 
lutely essential to clear reasoning in this department of 
the science. The conception of utility itself, unan- 
alyzed, is misleading. Simple as the term apparently is, 

* This chapter was published as a review article, in Jul}', 1881. 



THE THEORY OF VALUE. 77 

there are two widely different meanings in it, and a 
value theory leads to directly opposite results, accord- 
ing as, in the use of terms, the one or the other is 
adopted. What is utility? Evidently a capacity to 
serve, a power to satisfy wants. To satisfy wants is to 
change the condition of the person served, to bring him 
from a lower degree of happiness to a higher. Without 
the useful object the man^ for the time being, is in one 
condition ; with it he is in another. The power thus to 
modify subjective conditions is utility ; the difference 
between the two conditions affords the measure of that 
utility, that which we have termed value. In the 
measuring process, or mental valuation, the man rea- 
sons : "Without this article my condition, for a time, 
would be thus ; with it, it is thus ; the difference meas- 
ures the utility of the object." 

The cubic mile of air about your dwelling sustains 
your life ; of course it has infinite utility. But has it? 
Annihilate it and see. Other air at once takes its 
place, and your condition remains unaltered. Under 
actual circumstances that particular volume of the life- 
sustaining- gases appears not to have the power to 
modify your condition. Contrast your present state 
with your state if there were no air, and you find an 
indefinitely wide difference ; contrast your present state 
with that in Avhich the annihilation of that particular 
volume, and of no other, would have left you, and you 
find no difference at all. 



78 THE THEORY OF VALUE. 

The one mode of estimating gives a measure of what 
may be termed absolute utility ; and, in the case of air, 
this is indefinitely great. The other estimate measures 
what may be termed effective utility ; and, in the case 
of air, this is nothing. Effective utility is, then, power 
to modify our subjective condition, under actual cir- 
cumstances, and is mentally measured by supposing 
something which we possess to be annihilated, or som^ 
thing which we lack to be attained. 

Now, is not this the utility with which political 
economy has to deal ; and is not the former, or absolute 
utility, that with which actual treatises liave dealt? 
Moreover, is not the difference radical, and the failure 
to distinguish it ruinous to any philosophy? Air is 
not wealth, we have been taught, solely because no one 
can own it. True, of the atmosphere as a whole ; but 
cannot a man own some of it? Let him but close 
doors and windows, and he will have it. There it is, 
in sufficiently complete possession, and undoubtedly 
useful, in the prevalent sense of the term. In consis- 
tency we should term it wealth. It is not so; and we 
know it ; and our analysis reveals what is lacking, — ef- 
fective utility. The presence or absence of the particu- 
lar volume appropriated is indifferent to us, under actual 
circumstances; the presence of an indefinite supply, 
ready to replace it, destroys its importance. It is 
always in view of actual circumstances that we make 
our economic estimate ; and it is effective, and not abso- 



THE THEOKY OF VALUE. 79 

lute utility that is the basis of wealth and value. Ab- 
solute utility may, for present purposes, be forgotten. 

The measurement of effective utility in our illustra- 
tion was simple; but it is not in common practice, a 
comparison of two simple conditions that is presented 
to the mind when mental valuations are made. The 
problem is more complicated, though not so complex as 
to be difficult of analysis. A few typical cases will 
sufficiently illustrate the principles involved. Air in a 
closed dwelling was effectively valueless, because its 
withdrawal caused no inconvenience ; the owner's con- 
dition was the same before and after the withdrawal. 
Remove the drinking water from the table before him, 
and you modify his status ; it becomes needful that lie 
refill the glasses, and the sacrifice necessary to ensure 
the refilling, in whatever form that sacrifice may be 
made, is to be regarded as a subtraction from the sum 
total of his gratifications. If we could attain a unit for 
the measuring of happiness, it woidd be a compound 
standard like the foot-pound of mechanics, units of in- 
tensity multiplied by units of time. Applying such a 
standard, too ethereal, indeed, for practical use, to the 
condition of the man in our illustration, we should find 
that liis (lay's enjoyment had been lessened by the 
withdrawal of the water. It did not remain wanting, 
but was immediately restored ; yet the restoring process 
itself caused a lessening of the sum of our supposed 
subject's gratifications. The difference between tlie 



80 THE THEORY OF VALUE. 

present sum of his enjoyments, and the sum of enjoy- 
ments, had the removal not taken place, measures the 
effective utility of the water. Let us examine a third 
and last typical case, and suppose that the water 
removed was replaced by that which was less refresh- 
ing and serviceable. There are now two modifications 
of the owner's subjective status, one caused by the sac- 
rifice of replacing the water, and another by the inferi- 
ority of that which was brought in its stead. His sum 
of gratifications is twice lessened ; the measure of the 
effective utility of the water is determined, exactly as 
before, by comparing his present sum of gratifications 
with that which he would have attained had the re- 
moval and replacement not taken place. 

Now it is estimates like these that are actually made, 
in measuring the utility of commodities. There is at 
hand a well from which to draw, — a general market; 
and the removal of any article modifies a man's condi- 
tion as the removal of the water, in our illustration 
— he must replace the article by a sacrifice, and he 
may or may not replace it completely. If he replaces 
it completely, there is but one subtraction from the 
sum of his enjoyments ; if he replaces it but partially, 
there are two. In any case the resultant modifica- 
tion of his subjective status entailed by the removal 
of the article measures its effective utility. The re- 
moval of a coat lessens the owner's enjoyment, not 
* by the difference between his condition with such a 



THE THEORY OF VALUE. 81 

garment and his condition with none, but by the dif- 
ference between the sum of his enjoyments, had the 
coat not been taken, and the sum after the necessary 
sacrifice shall have been made to replace it, and the 
substitute, perfect or imperfect, shall have been brought 
into use. 

An individual man may make all these measure- 
ments ; value is possible, indeed inevitable, in a con- 
dition of isolation. Crusoe compared utilities with 
one another, though, having no bargains to make, he 
was under the less necessity of forming accurate esti- 
mates ; and men, in society, make such estimates in- 
dependently. A measurement of utility made by an 
individual gives value in use, not at all identical with 
what passes under that name in current discussion, 
which is utility itself, but the quantitative measure of 
that utility to an individual user. We have now to 
see that, in a sense, measurements of utility are never 
made by any other than a single independent being. 
Society, as an organic Avhole, is to be regarded as one 
great isolated being ; and this being may and does 
measure utilities like a solitary tenant of an island. 
This great personage is complex; it has collections of 
men as its members, and single men as its molecules ; 
and in studying the internal activities that take place 
when the valuations are in process, we shall be led 
into a sort of higher or social physiology, which will 
develop farther than has yet been done the parallelism 



82 THE THEORY OF VALUE. 

existing between the individual and the social organ- 
ism. It is from this source that, as was stated above, 
we are to derive our chief light on the philosophy of 
value. After the comprehensive view has been at- 
tained and the general movements of the social body 
traced, we may adopt, with advantage, the analytical 
method, fixing the attention on individuals, and find- 
ing how they deal with their neighbors. This is social 
microscopy. 

Market value is a measure of utility made by society 
considered as one great isolated being; market price 
is, of course, that measure expressed in terms of a com- 
mon standard. If the market value of a ton of coal 
and that of a barrel of flour are equal, it signifies that 
society, as an organic whole, estimates their respective 
utilities alike ; if the prices of the coal and the flour are 
the same, it signifies that society has measured their 
utilities by a common standard, and expressed the meas- 
urements alike, in terms of that standard. 

We need to be detained but a moment by the diffi- 
culty that, if a loaf of bread is worth, in the market, 
only a small fraction of a gem, all the loaves in the 
world w^ould be worth but a few gems; vrhile they 
possess indefinitely greater effective utility. It is es- 
sential to their present market value that they be 
offered and estimated separately. Were they owned 
and offered as a whole, their value would be indefi- 
nitely greater. Let some bold and successful monopo- 



THE THEORY OF VALUE. 83^ 

list effect what he would term a "corner'' in bread, 
and its value would indefinitely exceed that of all the 
gems in existence. 

More serious, in appearance only, is the fact of the 
vast service, under actual circumstances, which many 
low-priced articles render. How measureless is the 
utility, effective as well as absolute, of the poor man's 
loaf ! Its removal might starve him, though another 
were to be had for a dime. 

It is society, not the individual, that makes the esti- 
mate of utility which constitutes a social or market 
valuation. That is a part of our definition, — measure of 
service rendered to society as an organic whole. 
Though the thing were priceless to its owner, it might 
be cheap to society. 

But the owner is a part of the social body, and is 
the organic whole indifferent to his suffering ? If so, 
society is an imperfect and nerveless organism. It 
ought to feel, as a whole, the sufferings of every 
member, and what makes or mars the happiness of 
every slightest molecule, should make or mar the hap- 
piness of all. 

A sympathetic connection between members of so- 
ciety exists, and prompts to the relief of suffering; 
a sense of right also exists, and moves the social 
organism more powerfully in the same direction. It 
results from these influences that poor-laws are enacted 
and alms-houses established, and that the man whose 



84 THE THEORY OF VALUE. 

last obtainable loaf lias been destroyed may call upon 
a social agency to replace it. The loss entails upon 
the social body a minute expenditure of labor, a slight 
sacrifice in the replacement, and this, by the terms 
of our definition, gauges the importance of the loaf to 
society. The question upon what members of the 
social body the loss of wealth shall fall, is distinct 
from the question how great is that loss itself; the 
latter question determines the social estimate of 
effective utility, which fixes market value ; the former 
question is one of equity in the internal arrangement 
of society. Within its own membership the social or- 
ganism adjusts losses on equitable principles, throwing 
them, in the case of a pauper, first on a local commu- 
nity, and then on its individual members in propor- 
tion to their taxes. In any case the loss of a neces- 
sary article entails upon the social whole the neces- 
sity of diverting a quantity of labor from other pro- 
ductive directions, and this sacrifice gauges the market 
value of the article. 

The social organism is never nerveless ; indepen- 
dently of sympathy between man and man, there is 
a beautiful law of society as a whole, which makes 
the wants of every member a matter of decisive inter- 
est to all. It is society as a whole that originally 
bought the loaf from its producer ; in a sense, it 
bought it for the poor man, and for him only, and 
would never think of taking it from him. Parents 



THE THEORY OF VALUE. 85 

would not take away a child's toy, not mereiy because 
of affection, but because of the adaptation of the toy 
to the child's use. Acting for the family as a whole, 
they bought the plaything for the child, and to trans- 
fer it to themselves would lessen its service to the 
family. Independently of personal sympathies, society 
assumes a paternal relation toward particular mem- 
bers, buys articles for their use, consigns the articles 
to -them, and has no desire to take them again. 

Exchanges are always made between an individual 
and society as a whole. In every legitimate bargain 
the social organism is a party. Under a regime of 
free competition, whoever sells the thing he has pro- 
duced, sells it to society. His sign advertises the 
world to come and buy, and it is the world, not the 
chance customer, that is the real purchaser. Yet it 
is equally true that whoever buys the thing he 
needs, buys it of society. Under free competition 
the world is seeking to serve us, and we buy what the 
world, not a chance producer, oifers. 

When market valuations are made, society is pri- 
marily the buyer. Goods in individual hands are offered 
to the social whole, and the estimate of utility made 
by that purchaser fixes their market value. In the 
process the social organism is true to its nature as a 
single being, great and complex, indeed,' but united 
and intelligent. It looks at an article as a man would 
do, and mentally measures the modification in its own 



86 THE THEORY OF VALUE. 

condition which the acquisition of it would occasion, 
or which the loss of it would occasion, if once pos- 
sessed. " With the article my condition is thus ; with- 
out it, thus; the difference measures its effective 
utility ; " such is the mental process by which individ- 
ual or society makes a valuation. The three typical 
cases in our former illustration apply equally here. 
Would an article in possession, if removed, be replaced 
without sacrifice, like the air in a closed room ? The 
measure of its effective utility is nothing. Would it 
be replaced at some sacrifice? Its effective utility is 
gauged by the sacrifice. Would an imperfect substi- 
tute take its place ? Its utility is gauged by the two- 
fold sacrifice entailed. These cases are all; for there 
is nothing, not paintings by Raphael, nor gems from 
monarchs' diadems, for which some substitute, perfect 
or imperfect, is not to be had. 

When society, as a consumer, has bought a thing, 
it must locate it in the organic whole. The locating 
process has its laws, and society must estimate what 
is offered to it in the market in view of the j^lace in 
the social body which, by the laws of this higher 
physiology, it is compelled to fill. There are laws of 
property, fixed principles of distribution ; these are 
facts to be recognized, conditions which determine 
the estimate which society is to make. As a molecule 
of nutriment in the human system does not diffuse 
itself through the body, but passes, by the circulating 



THE THEORY OF VALUE. 87 

organs to the part that needs it, so useful commodi- 
ties, molecules of social nutriment, unerriiigl}- follow 
the circulatory laws of the social system. Nerve 
tissue to the nerves, bone tissue to the bones, each 
particle reaches the place for which it is adapted. 

It would be interesting, in itself, to analyze the 
process of distribution, and determine the forces which 
locate, in tlie social organism, the things which it 
buys for consumption. It would, however, extend 
this chapter unduly, and would lead us at once into 
detailed and analytical modes of study, which are 
foreign to our present purpose. It is sufficient, for 
the present, to notice that there are fixed laws of 
social circulation, and that whatever is taken from 
the market is located in, the social body, by laws 
which societ}^ is not at liberty to violate. It becomes 
evident, then, that a thing may have a fixed market 
value, while its value in use is indefinitely great or 
indefinitely small, according to its location. The poor 
man's loaf; what an intense desire it satisfies! As 
removed, its utility is measured by hunger; as re- 
placed, by hard labor. The rich man's loaf; what a 
bagatelle in his estimation ! Even its absence would 
but modify an abundant bill of fare, while its replace- 
ment would cost an inappreciable sacrifice. How 
values in use would be augmented could the location 
of articles be arbitrarily changed. Yet such a whole- 
sale confiscation would mean the most violent of rev- 



88 THE THEORY OF VALUE. 

olutions, and would lead to a chaotic condition fatal 
to the welfare of all. Yet better systems of social 
circulation may be before us, in the future, if we 
can but wait for their development. 

The expression value in exchange has, for the sake 
of clearness, been, thus far, avoided; since, by its 
origin and common use, it is adapted to signify some- 
thing different from either of the kinds of value which 
we have considered. It should mean simply indirect 
value in use, or the measure of the utility, to the 
owner of a thing, of the commodities which he can 
get in exchange for that thing in the market. It is 
as abstract as any form of value ; it is not the things 
themselves which the person can get in exchange, 
but the measure of their utility to him. While com- 
pletely distinct from market value, it is dependent 
on it ; society's estimate of the utility of an article 
to itself determines what it will give for it, and what 
society gives, the individual seller receives. 

The inaccuracy of the term purchasing power, often 
used as synonymous with value in exchange, consists 
mainly in its implying a power in the commodity 
itself to effect a purchase. Such power resides in 
men, not in things. If it be intended to indicate 
the quality in things that satisfies wants and influ- 
ences men's actions, the name of that quality is utility. 
If it be intended to denote the degree to which it 
satisfies wants and influences action, the term is meas- 



THE THEORY OF VALUE. 89 

lire of utilty, or value. If what is meant be the rate 
at which exchanges are made, in consequence of this 
influence, a less misleading expression would be ratio 
of exchange, or barter price. This is one of society's 
two modes of expressing valuations; as its estimate of 
utility expressed in terms of a conventional unit is 
ordinary price, so that estimate expressed in general 
comparisons is barter price. 

It is not intended, just here, to make a treatise on 
value ; and the intricacies of this complicated theme 
cannot be discussed, nor even alluded to. It would 
be a source of satisfaction to apply the broad princi- 
ples laid down to the more interesting of tliem. We 
should learn, for example, the incorrectness of the 
current doctrine of the absence of any real standard 
of measurement for value. The standard exists, 
though psychological in character and difficult of use. 
Difference of subjective condition, measure of gratifi- 
cation, is the basis of the measurements of utility 
which give value. The attempt to attain a unit for 
such measurements will not lead us into the unprofit- 
able intricacies which result from the theory that value 
is fundamentally relative, based on mutual comparisons 
in which A measures B, and B, A, and there is no 
positive unit. Though too immaterial for accurate 
use, the standard exists, and the aim should be to 
recognize and approximate it. 

The aim of this chapter is attained if, without 



90 THE THEORY OF VALUE. 

attempting to discuss intricate phenomena of value, 
it has succeeded in truly stating the fundamental prin- 
ciples which govern them ; if it has shown the nature 
of value, as a measure of a quality of things, its 
inseparable connection with utility, the nature of 
utility, absolute and effective, and the part played by 
society as an organic unit in valuing processes. After 
this we are prepared for microscopy. Now we may 
fix the attention on individuals, and their complicated 
interactions. They will no longer confuse and lead 
into mazes of logical wandering, but will throw the 
same light on the general laws with which we start 
that the curious movement of microscopic corpuscles 
in the blood throw on the general movement of the 
life-giving current. We should push the analysis to 
greater lengths than is done by those current methods 
of study whose fault is their minuteness. We should 
study the very nature of man himself; for the ultimate 
forces of society, as of physical nature, are atomic ; 
the individual is the originator and the end of every 
movement. He is microcosmical, like the monad of 
Leibnitz, a mirror of the universe ; and the philosophy 
of value and of other phenomena of society can be 
grasped only by a view that is broad enough to 
include the entire social organism, but, at the same 
time, minute enough to apprehend the nature of the 
social atom. 



CHAPTER VI. 

THE LAW OF DEMAND AND SUPPLY. 

Value expresses itself in the quantitative ratio in 
which commodities exchange for each other in the mar- 
ket. This ratio is determined by Demand and Supply. 
It is not matter but utilities which are created by labor 
and destroyed by use, and which are, therefore, the 
subjects of Production and Consumption ; they are, in 
like manner, the subjects of Exchange and Distribution. 

A commodity is to be regarded as an aggregate of 
utilities held together by a common material basis. 
These qualities are of different kinds, and each appeals 
with a certain force to the desires of men. The strength 
of the desire for a commodity equals the aggregate 
strength of the desires for the various services which it 
can render. 

Consumers gratify their wants in the order of their 
intensity, as far as their available means permit. A dry 
but useful formula will best define the demand with 
which political economy has to deal. Let A, B, C, D, 
and E represent different objects of desire ; let the 
strength of the wants, in the case of a class of persons, 
vary in a scale from 5 to 1, that for A being the most 



92 THE LAW OF DEMAND AND SUPPLY. 

intense. Let the price of each be represented by a 
single unit of value. The scale will stand as follows: — 

A, B, C, D, E, = Different objects of desire. 
5, 4, 3, 2, 1, = Relative intensity of desires. 

The man with one unit of means available for present 
use will purchase A ; the one with two units, A and B ; 
the one with four units, A, B, C, and D. In each case 
there will be a definite point where purchases will cease ; 
and though an article which lies beyond that limit in 
the scale could easily be purchased, it will not be so, 
because of the mental attitude of the possible purchaser. 
The man with three units of means will not buy D nor 
E, though he might take them both and have a unit 
left. 

Demand for what falls within the purchase limit is 
the " effectual demand" of the traditional theory. The 
limit is determined by the price of the article, and the 
available means and the mental status of purchasers. 
The subjective factor last named is the most inconstant, 
and produces the most sudden changes in the market. 

Under a regime of free competition prices are ad- 
justed by a simple law. If the supply of a particular 
kind of commodity be regarded as fixed, as during brief 
intervals it may be, it will be offered at a tentative price, 
which will be subsequently raised or lowered until the 
quantity offered is found to be within the purchase 
limit of persons enough to take it. The tentative price 



THE LAW OF DEMAND AND SUPPLY. 93 

is, ill many cases, too high ; a part of the supply is then 
found to lie above the limit, and this, therefore, remains 
unsold. If there is a necessity for selling it, the price is 
gradually lowered, and each step of the decline brings 
the article within some one's purchase limit, and thus 
secures a new " effectual demander." 

How far must the price fall in order to accomplish 
this enlargement of the market ? The answer depends 
on the nature of the want to which the utilities em- 
bodied in the article appeal. The necessaries of life are 
the objects of a desire so intense and universal that it 
is habitually satisfied by nearly all members of a com- 
munity. This want would stand at 5 in our ideal scale, 
and the man with but one unit of means would use it 
in procuring the articles which supply it. It is impossi- 
ble to secure many new customers for the plainest kinds 
of food ; no cheapness of provisions will induce more 
men to eat than already do so. To induce the present 
purchasers to consume more than they have heretofore 
done would be another method of enlarging the market ; 
but the possibility of doing this is also limited. The 
want of mere food is inexpansive ; a definite quantity 
completely satisfies it, and most persons secure about 
that quantity. 

Wheat is not the plainest material for food, and the 
desire for it could not, with strict accuracy,, be placed at 
the bottom of the scale ; but it is near enough to that 
point to illustrate the principle. The desire for wheat 



94 THE LAW OE DEMAIStD AND SUPPLY. 

is^itejtise, universal and inexpansive ; a definite quan- 
tity is nciw purchased, and but little more is wanted. 
This fact is the basis of the very disproportionate 
fluctuations in its price which follow changes in the 
supply. A large crop of wheat is worth far less in the 
aggregate than a small one ; and statistics have led Mr. 
Tooke to the conclusion cited by Mr. Mill, that an 
unrelieved deficit of one-third in the general corn crop 
of England might advance the price tenfold. 

With utilities which minister to wants midway in the 
scale the case is different. These desires, as we have 
seen, are indefinitely expansive, but decrease iu inten- 
sity as the desired objects are supplied. This is true 
of what may be termed the qualitative increments of 
the necessaries of life. An improved variety may find 
a market where an increased amount fails to do so. 
The man who has food enough, such as it is, may easily 
become a customer for something better. To leave the 
quantity unchanged and improve the quality is to make 
a net addition of a qualitative increment. It is to offer 
for sale no new commodity, but a new utility of a higher 
sort, one which ministers to wants lying midway in the 
scale and comparatively expansive. 

For this reason the natural growth of production 
tends to take a qualitative direction, improving rather 
than quantitatively increasing the food, clothing, fur- 
nishings, etc., of a community. Making no more shoes 
than formerly, the shops of Lynn may, by making better 



THE LAW OF DEIIHAND AND SUPPLY. 95 

shoes, create many more utilities, and in this is afforded 
an outlet for an indefinitely increased expenditure of 
labor and capital. General over-production of qualita- 
tive increments is a theoretical and practical impossi- 
bility ; and the turning of productive energies in this 
direction has resulted, in fact, in constantly raising the 
standard of living of all classes. Whether the laboring 
class has received its due proportion of benefit from this 
cause is a question generally answered in the negative ; 
but of the fact of an absolute advance in the standard 
of living of that class there is no doubt. 

Wants of the highest grade are indefinitely expansive, 
and increase in intensity with an increased supply of 
the objects that gratify them. They are less univer- 
sally developed than those of the lower grades ; but 
they have, in every man, at least a rudimentary exis- 
tence, and are always strengthened by exercise. Cheap 
books ensure reading, and thus an increased appetite 
for reading. A fall in the general price of publications 
ensures larger sales to habitual consumers, and increases 
the number of the consuming class. The most expan- 
sive of all markets is that for the appliances for intel- 
lectual, aesthetic and moral growth. Here is a limitless 
outlet for productive energy, and the extent to which 
it is utilized is the gauge of genuine economic progress. 

Accompanying the highest motives, and imitating 
their action, here as elsewhere, is that love of esteem, 
that universal and not unworthy vanity, already re- 



96 THE LAW OF DEMAND AND SUPPLY. 

ferred to. This motive creates a highly expansive 
market for whatever acts as a badge of social caste. 
Yet it is this identical want the working of Avhich pro- 
daces the most frequent and sudden fluctuations of 
value. It demands conformity to a changing style in 
clothing, furnishings, decorations, dwelling, equipage 
and an infinitude of semi-aesthetic form utilities. 

The fluctuations in price resulting from this cause 
greatly over-balance, within limited intervals, those 
resulting from changes in supply. Fashion makes and 
destroys utilities capriciously and on a vast scale. The 
garment that is to-day as comfortable and as comely as 
it ever was, has lost over night the caste-marking power 
which is one of its major utilities, and its value is 
reduced by a half. Civilization multiplies the finer form 
utilities the value of which fashion dominates, and in- 
creases the importance of this changeful influence. 

Under a regime of free competition most utilities have 
a normal price, toward which, during long intervals of 
time, the market rate continually tends. This normal 
price is that which will afford to the workmen engaged 
in the production ordinary wages, to the capitalist cur- 
rent interest, and to the employer an average profit. 
If the selling price is above this amount, there is an 
inducement to enlarged production, whiph reduces the 
current price to the normal limit. If, for any reason, 
the market yields less than a normal rate, there is a 
necessity for curtailed production, Avhich raises the 



THE LAW OF DEMAND AND SUPPLY. 97 

market price to the natural limit. During a long term 
of years utilities, as embodied in products, sell for the 
cost of production and an average profit. 

Amid these changes in the quantity produced the 
cost of production does not remain stationary. The 
normal price is never, during a long interval, fixed. 
Certain commodities, when created in increased amount, 
have been said to require a more than proportionate 
increase of labor. To double the present wheat supply 
would, according to the current theory, involve more 
than double the present expenditure in production. 
The law of " diminishing returns" of agriculture be- 
comes, in terms of the formulas here employed, a law 
of increasing costliness of elementary utilities. It 
means, not that food will be scarce and men hungry, 
when the world is more densely peopled, but that the 
food supply, enlarged as it must and will be, will cost 
more labor per capita than at present. 

The basis of this accepted principle is the fact that 
elementary utilities are created through the action of 
the vital forces of the soil, and that nature is not every- 
where equally generous. The best land is used first, 
and afterwards that which rewards labor less liberally. 
The normal price of that which man wins from une- 
qually liberal nature must rise as the growth of popula- 
tion occasions an enlarged demand for food, and as this, 
in turn, compels a resort to poorer and poorer soils. More 
and more in the sweat of his face must man eat his 



98 THE LAW OF DEMAND AND SUPPLY. 

bread, though he may procure comforts and intellectual 
enjoyments with a constantly lessening effort. 

It is conceded that the invention of machines, and the 
adoption of improved processes in agriculture retard the 
operation of the law of diminishing returns, and hold it, 
during considerable intervals, completely in abeyance. 
It is conceded that improved means of transportation 
have a similar effect. Had the American continent, in 
Ricardo's time, been towed bodily across the Atlantic, 
and anchored with its shores in contact with the British 
Islands, the wheat fields of Dakota would not have been 
as near to London, if distance be estimated in cost of 
transportation, as they are to-day. Many a mill, a half- 
century ago, revolved its wooden wheel in parts of 
England from which the grist could by no means then 
known be carried to London with so small a deduction 
for expenses by the way as can the present output of 
the mills of Minnesota. The relief thus experienced 
by the consumers of flour in London is as real as though 
wheat-raising in England had become more remunera- 
tive. Wheat, in the London market, is an aggregate of 
elementary and place utilities, and improved facilities 
of transportation have so cheapened the latter as to 
counterbalance the increased costliness of the former. 

A counteracting influence, to which little justice is 
done, is that of the accumulation of capital and the 
reduction of interest. The expenditure of capital 
enough will make the best of land out of what now 



THE LAW OF DEMAND AND SUPPLY. 99 

ranks as the poorest ; and if that capital will but con- 
tent itself with a sufficiently small proportion of the 
returns of cultivation, the reward of the labor itself 
may be as large as that now realized from the soils in 
use. When a hundred million dollars are available for 
dredging the deposit from the mouth of the Mississippi, 
and depositing it on the sands of Florida, for a return 
of one per cent upon the investment, it is conceiva- 
ble that labor may win as much from the use of the 
artificially jnade land as it does from that which is 
not burdened by the claims of the capitalist. 

It may be maintained that all these influeiices are 
temporary ; that the principle at the basis of the law 
of the diminishing returns of agriculture is perma- 
nent ; and that, in the end, this tendency must over- 
come the others. The time may be remote, but it is 
said to be coming, when labor applied to the soil must 
create a smaller product than now rcAvards it, and 
when man must win by harder and harder effort the 
privilege of mere existence. It remains, therefore, to 
notice an influence which is a chief basis of economic 
optimism, since it is capable of holding the law of 
diminishing returns for an indefinite period in abey- 
ance. 

We do not here combat that essential Malthusianism 

which maintains that a retarding of the rate of increase 

of population is an ultimate necessity, if humanity is to 

fully enjoy the earth, and to perfect itself. The prob- 
LofC. 



100 THE LAW OF DEMAND AND SUPPLY. 

able condition of the future is that of a constantly 
increasing population, and of a constantly diminishing 
rate of increase. These tendencies, acting together, 
would give, at some point in the indefinite future, a 
comparatively stationary condition, in which popula- 
tion, having become exceedingly dense, would show, 
from decade to decade, little, if any, increase. Mal- 
thusianism of a certain type would predict a reign of 
increasing misery during the indefinitely long period 
before the stationary condition is realized.^ Is there 
ground for such a belief in economic law? 

The cost of creating form utilities is constantly 
lessening ; and form utilities are more and more prepon- 
derating in the wealth of society. That which human- 
ity, as a whole, enjoys costs it a continually lessening 
sacrifice. 

That which produces form utilities is not the crea- 
tive power of nature, but the transforming power of 
men ; and this power becomes progressively efficient as 
production enlarges. New motive powers, machines, 
and processes are multiplying, and promise to increase, 
beyond any discernible limit, the capacity of man to 
transform what nature places in his hand. If elemen- 
tary utilities become costlier by one-quarter, and form 
utilities cheaper by one-half, the resultant is a gain 
for humanity in the enjoyments which it can se- 
cure. 

A numerical illustration will place this principle in a 



THE LAW OF DEMAND AND SUPPLY. 101 

clear light. Let us suppose that the mflueiices which 
retard the action of tlie iDrincipIe of diiuinishing re- 
turns in agriculture have done their full work, and 
that the law is asserting itself, and causing a day's 
subsisteiice for society to cost, decade after decade, an 
increasing proportion of the day's labor. Let us say 
that, in the year 2000, two-fifths of the labor of soci- 
ety, as a producing organism, is expended in creating 
elementary utilities, and three-fifths in creating form 
and place utilities. Let us suppose that the lapse of 
a century reverses this numerical proportion, causing 
three-fifths of the total labor to be expended upon the 
elementary utilities ; does it follow that society gets, 
in the aggregate, less than before for the total effort 
of a day or a year ? Not if the labor expended upon 
form and place utilities has gained in efficiency more 
than other labor has lost. If the social effort, which 
is still available for the creation of the higher utili- 
ties, has become twice as effective as before, then the 
total labor of the producing organism will secure for 
it a far greater aggregate result. Mankind may be in- 
definitely better off, on the whole, when three-fifths of 
its total effort is crudely agricultural. If it takes ac- 
count of stock at the end of a j'ear, estimates its total 
gains and sacrifices, and compares them with those re- 
corded for a similar period a century before, it will 
find this as a result : it has been fed, as during the 
earlier year, and it has been better served in every 



102 THE LAW OF DEMAND AND SUPPLY. 

other direction. The two-fifths of its labor force, still 
available for the creation of higher utilities, has fash- 
ioned its clothing and built its dwellings in a better 
manner ; and it has instructed, amused, and, in aesthetic 
and spiritual ways, ministered to it far better than 
was possible in the days when a larger but less effi- 
cient force was expended in these directions. In the 
terms of our formulas, the utilizations of SQciety have 
increased, and the organism has approached nearer 
to its economic goal. Its intelligence has triumphed 
over resisting nature, and, though she succeeds in ex- 
acting a larger and larger proportionate effort in the 
production of crude subsistence, she undergoes from 
decade to decade a more complete subjugation. She 
is compelled to minister more and more subserviently 
to the higher wants of man. 

The law of diminishing returns in agriculture would, 
in itself, give promise of a condition in the future in 
which food will be as plentiful as now, but in which 
the gaining of it will absorb an increased proportion 
of the labor of the social organism. The effect of this 
would be to lessen the amount of labor available for 
the creation of finer products, and this diminution 
would be far more than compensated by the greater 
effectiveness of this labor. We may, then, admit the 
law of diminishing returns in agriculture, and fear 
nothing for the future of humanity. The basis of 
economic welfare is broadening, and if this tendency 



THE LAW OF DEMAND ANT> SUPPLY. 108 

is ever reversed, it will be at a time too far in the 
future to be a subject of present consideration. 

The inaccuracies of thought in the orthodox theory 
of Demand and Supply are chiefly of importance for 
their bearing on the outlook for the future of the race. 
It will be remembered that Mr. Mill's statement of the 
law divides commodities into three classes, namely, 
those which cannot be reproduced, those which can be 
produced in any quantity at a uniform cost, and those 
which can be produced in enlarged quantity, but only 
at an increasing cost. Articles of the first class are said 
to have no normal or " natural " price ; those of the sec- 
ond have a natural price which is uniform, regardless 
of the quantity produced ; and those of the third have 
a natural price which rises with increasing production. 
For commodities the cost of which diminishes with in- 
creasing production the theory makes no provision, and 
the omission is unfortunate. 

If the law of Demand and Supply be based on what 
labor creates, not matter but its utilities, it will be seen 
that the first class named in the traditional statement 
of the theory can scarcely be said to exist. To repro- 
duce an article is to reproduce its serviceable qualities ; 
and it is, perhaps, never the case that an article is of- 
fered for sale of which none of the utilities can be 
thus duplicated. Where any of the major utilities of 
a commodity can be reproduced, the article is, in so 
far, subjected to the ordinary laws of the market, and 



104 THE LAW OF DEMAND AND SUPPLY. 

its price is, in part, determined by the cost of repro- 
duction of those particular utilities. 

It is obvious, without careful analysis, that the price 
of rare articles is greatly influenced by the possibility 
of producing substitutes for them. To multiply ap- 
proximate reproductions of a rare painting is to lessen 
the intensity of the competition for the painting 
itself. A Cremona violin of a given age sells for less 
than it would command if other violins of nearly 
equal quality could not be manufactured. The price 
of the rare instrument consists of two distinguishable 
parts, first, the market price of fine violins, as gov- 
erned by the cost of production, and, secondly, a 
special premium for the unique excellence of the old 
instrument. 

Accurately stated, the law is this : a few commodities 
contain certain utilities which cannot be duplicated, 
and others which can be so; the former command a 
price determined by the direct action of demand and 
supply, and the latter tend to sell at a normal rate, 
fixed by the cost of reproduction. The market price of 
such commodities is the aggregate price of their differ- 
ent utilities. Mr. Mill's own illustrations prove this 
principle. Rare wines contain properties peculiar to 
themselves, and others which are common to a Avide 
range of similar products. The value of the Johannis- 
berger vintage consists of the market value of an equal 
quantity of other fine wine, plus a premium for its own 



THE LAW OF DE:MAND AND SI^PPLY. 105 

inimitable flavor. The price of antique statues, when 
they fall into the market, is somewhat affected by the 
value of substitutes which may be multiplied at will; 
and the same is true of all the articles enumerated. 

If there are commodities of which the supply may 
be increased indefinitely at a uniform rate of cost, it is 
because the cheapening of the form utilities embodied 
in them chances to exactly counterbalance the growing 
costliness of the elementary. A fine watch consists 
mainly of elementary utilities, in the case, and of form 
utilities, in the movement. If the consumption of 
watches were to be quadrupled, it might happen that 
the greater costliness of the one part would oifset the 
greater cheapness of the other. The second of the 
traditional classes may have a fortuitous and transient 
existence. 

The third class has a somewhat better basis. If the 
law of diminishing returns in agriculture were ad- 
mitted, it would be necessary to accept the conclusion 
that crude nutriment w411 become costlier as population 
increases. It would then be of importance to note 
that there is a class not noticed in the traditional the- 
ory in the case of which the reverse of the above law 
is true. Commodities consisting mainly of form util- 
ities are unquestionably becoming cheaper ; and among 
these are all products which minister to intellectual, 
aesthetic and spiritual wants. If the conditions of the 
future were to involve plainer living, they would at 



106 THE LAW OF DEMAND AND SUPPLY. 

least be more favorable to high thinkiug ; and we 
might welcome a tendency which would make it neces- 
sary for men to forego some of the sensuous enjoy- 
ments of life, if it, at the same time, enriched them in 
intelligence, refinement and moral character. If the 
man of the future is to be wiser and better than the 
man of to-day, we need not be troubled with the ques- 
tion whether he will or will not be happier. We do 
not admit, however, that the spiritual gain is to be 
purchased by a physical sacrifice. The world is, in 
fact, becoming more tolerable to man as an animal, and 
it is becoming indefinitely more favorable to him as a 
rational being. 



CHAPTER VII. 

THE LAW OF DISTRIBUTION. 

That mankind as a whole shall become richer does 
not, of necessity, involve an increase of hnman wel- 
fare. That is dependent, not only on the quantity of 
wealth accumulated, but on the mode in which it is 
shared. A better division of the results of industry 
might atone for some diminution in the amount pro- 
duced. As bearing on the prospects of mankind, there 
are three practical problems to be solved; of these the 
first is how to create, with the least sacrifice, the 
largest aggregate of utilities: the second is how to 
justly divide the gain ; and the third is how to ensure 
in the product that quality which shall cause it to 
minister to permanent rather than to transient well- 
being. We are now to consider the second of these 
problems. The quantity of wealth created is, in fact, 
increasing faster than population ; are the equities of 
distribution also increasing ? 

The mode of dividing the proceeds of social industry 
is changing, under our eyes, at a rate so rapid that it 
is difficult for a scientific system to keep pace with 
it. Demand and supply are the regular agents of 
distribution, and have divided the stream of social 



108 THE LAW OF DISTRIBUTION. 

production into three channels, containing respectively 
Rent, Gross Profits, and Wages. Of these, the first 
has been traditionally regarded as determined by a 
more or less independent law ; and it will be conven- 
ient for our purposes to accept this theory, and con- 
fine our attention to the division which determines 
the amount of wages and of profits. 

Vital as are the interests centering in the law of 
wages, the subject is full of unsettled theoretical 
questions of a kind that, as one would suppose, ought 
to be forever decided by a little clear and candid 
thought. There is, moreover, a moral element in 
these questions. Points of fact suggest problems in 
equity. What are wages? From what source do 
they come? What determines their amount? These 
questions suggest the inquiry whether, in nature, 
source, and amount, they are what they ought to be, 
or whether there is, in the present transactions of 
class with class, a series of wrongs which demand a 
reform, and, as an alternative, threaten a revolution. 

In the absence of a scientific answer to the points 
of equity at issue, and of one so clearly proven as to 
compel belief, interest dictates the replies given in 
the greater number of cases ; and this fact arrays one 
social class against another, and makes it possible for 
each to claim a moral basis for its action. The con- 
tests of interest between capitalists and laborers are 
intensified by counter-claims in equity ; and the prob- 



THE LAW OF DISTRIBUTION. 109 

lem thrust upon society is not merely how to divide 
a sum, but how to adjust rights and obligations. 

Politics cannot escape the dominant influence of 
these ethico-economic issues. The solidarity of capi- 
tal on the one hand, and of labor on the other, are 
things of which the founders of our republic thought as 
little as the founders of our system of economics. 
The strain to which this influence is about to subject 
our institutions would be indefinitely less if the counter- 
claims in equity could be in so far settled that men 
not biased by belligerent feeling might be in substan- 
tial agreement concerning them. If it is humanly 
possible to thus settle the questions at the basis of the 
law of wages, no scientific Avork can be more immedi- 
ately and widely beneficent. These questions tend, 
if rightly answered, to public order; if wrongly an- 
swered, to communism ; and, if unanswered, to agita- 
tion and peril. 

The very allusions to the solidarity of labor and 
of capital which it has been necessary to make, may 
seem to have j)laced out of order any farther discus- 
sion of the accepted law of demand and supply. That 
has been supposed to rest on the antecedent fact of 
free competition, to which solidarity is the antithesis. 
If labor, on the one hand, and capital, on the other, 
should ever act as units in the dividing' of the prod- 
uct of their industrial action, true competition would 
be totally suppressed. Such a condition is one im- 



110 THE LAW OF DISTRIBUTION. 

possible extreme, while the other is the condition of 
unhindered competition which crude thinking has 
placed at the basis of economic law. The facts of 
actual industry are between the extremes, and a theory 
of Distribution must conform to the facts. 

Free competition itself is, as we shall later see, not 
an unrestricted scramble for gain. Of these two pro- 
cesses the former has recently existed, and in certain 
fields still exists, while the latter is so completely 
antiquated that the most we have to do with it is to 
show its monstrosity. The only possible mode of 
attaining a true law of distribution is to ascertain how 
demand and supply would operate under a regime of 
competition in the true sense free, and, secondly, how 
that action is modified by the growth of what, in the 
absence of an authorized term, I should like to call 
soUdarism, or the tendency of both labor and capital 
to aggregate, and act, within extensive fields, as units. 
There is, indeed, no prospect that competition will ever 
be totally suppressed; in spite of all encroachments on 
its territory it will doubtless have a residual field of 
action in permanent possession. 

Nothing is more confusing than the view which rep- 
resents demand and supply as acting promiscuously 
on everything bought and sold. This view implies a 
general receptacle termed a market, into which com- 
modities are indiscriminately thrown, and in which, in 
some way, they receive a valuation. In this theory of 



THE LAW OF DISTRIBUTION. Ill 

the market and its action labor is usually classed as a 
commodity, the price of which is fixed in the same 
manner as that of other articles in the promiscuous 
assortment. 

The action of demand and supply is systematic and 
capable of clear analysis. It proceeds in one way in 
the case of products ready for social consumption, in 
another in the case of the specific utilities which 
workers in the producing series impart, and in still 
another in the case of the shares of capitalists and 
laborers who jointly create a particular utility. To 
fix the value of clothing ready for use is one thing; 
to divide that value among agriculturists, transporters, 
manufacturers and tailors, is another; and to adjust 
the proportions falling to capitalists and to laborers in 
each of these producing groups is still another. The 
entire distributing process consists of a division, a sub- 
division and a farther subdivision of the general prod- 
uct of social industry. Demand and supply have a 
primary, a secondary and a tertiary field of action. 

Social production takes place, as already noticed, not 
by a single operation, but by a succession of many. 
One producing agency begins with crude nature, and 
so modifies it as but partially to prepare it for render- 
ing its service to men ; another and another continue the 
operation. The ultimate result of the action of all is 
a completed product, and the particular change effected 
by each may be distinguished as a sub-product. The 



112 



THE LAW OF DISTRIBUTION. 



elementary utility created by mining is the first sub- 
product of a certain series ; the place utility imparted 
by transportation is a second; the form utility result- 
ing from smelting is a third ; that from puddling and 
rolling is a fourth ; that from cutting is a fifth ; while 
the aggregate of all is the keg of nails of our former 
illustration. 

In the order of production the series stands as fol- 
lows : — 

Synthesis Kesulting in the Completed Product, Nails. 



1st Sub-Product. 


3d Sub-P. 


3d Sub-P. 


4th Sub-P. 


Sth Sub-P. 


Elementary Utility. 


Place U. 


Form U. 


Form IT. 


Form U. 


Ore. 


Transporta'n. 


Smelting. 


Puddling, etc. 


Cutting. 


Resulting from the joint 
action of 


Joint result of 


Joint result of 


Joint result of 


Joint result of 


Capital and Labor. 


C and L'. 


C" and L". 


C'andL'". 


C"" and L"". 



The first sub-product is an elementary utility created 
by capital and labor; the second is a place utility cre- 
ated by another kind of capital and labor ; the third, 
fourth and fifth are specific form utilities, each created 
by its own variety of capital and labor. The com- 
plete product, nails, is the outcome of the application 
of C, C, C", C" and C"", and of L, L', L", L'" and 
L""; it is the resultant of five specific kinds of effort, 
each assisted by the form of capital adapted to it. 
Social production is, thus, a synthesis of clearly distin- 
guishable elements. 

Distribution is the reverse of this synthesis ; it is an 
analytical process which resolves the above aggregate 



THE LAW OF DISTRIBUTION. 113 

into its components. It deals, however, with pure 
quantity ; it separates, not commodities into their 
component utilities, but values into a series of quan- 
titative increments. It determines the amount of 
social wealth embodied in a quantity of nails ; it then 
fixes the proportion of that sum represented by each of 
the sub-products which constitute the nails, and, again, 
the proportion of each of these latter amounts which 
belongs to capital and to labor. In terras of our 
diagram, distribution determines the value of the Com- 
pleted Product, resolves that amount into the values 
of 1st sub-P. 2d sub-P. etc., and then subdivides the 
value of 1st sub-P. between C and L, that of 2d sub- 
P. between C and L', etc. 

The steps of the actual distribution follow, in time, 
the order of production, which is the reverse of the 
logical order of division. The secondary subdivision is 
made, in reality, first. The first sub-product is dis- 
tributed among capitalists and laborers before the 
amount of that sub-product is fixed by an actual sale. 
The mining company must usually pay its men before 
actually parting with its ore. It proceeds thus with 
but little risk, since the value of the ore is sufficiently 
gauged by current sales by other ore producers. In 
like manner the value of the sub-products is, in each 
case, determined before that of the completed product is 
actually fixed by a final sale. Ore, pig iron, bar iron, 
etc., are sold before the particular nails which embody 



114 THE LAW OF DISTRlBUTlOISr. 

the value of all are placed upon the market. The value 
of the nails is, in the meanwhile, sufficiently gauged by 
other sales of that commodity. 

The final sale of the completed product is, in reality, 
a dividing process. It is a quantitative division of the 
general product of the industrial organism. That which 
fixes the purchasing power of nails assigns to the nail- 
producing group its quantitative proportion of the total 
utilities resulting from industry. Society is here to be 
regarded as the purchaser ; the sellers are the creators 
of the last sub-product in the series ; and the parties in 
the division effected by the sale are the nail-producing 
group, on the one hand, and all other groups, on the 
other. The fate of the whole group is thus, in a sense, 
intrusted to the creators of the last utility in the series, 
who, by the nature of the arrangement, must act as sell- 
ing agents. 

The earlier sub-producers have received their aggre- 
gate share of the product by the sale of bar iron to the 
nail-cutters ; the still earlier ones have obtained theirs 
in the sale of pig iron, etc. Each of the earlier sales in 
the series effects a division between the groups of pro- 
ducers whose work has preceded the sale, and those 
whose work is to follow it. 

The reward of each particular producing group is de- 
termined by the buying of the antecedent sub-products, 
and the subsequent selling of them with the addition of 
another utility. The nail-maker buys material, trans- 



THE LAW OF DISTRIBUTION. 115 

forms and sells it ; and his product, quantitatively con- 
sidered, is the difference in the measure of the utility 
of the article, which is caused by the transformation. 
He converts that value into currency by buying bars 
and selling nails. 

The process which divides a sub-product, quantita- 
tively considered, between capitalists and laborers differs 
in principle from the more general divisions, and de- 
mands fuller consideration. In the meanwhile we need 
to examine the mode in which demand and supply 
operate, as adjusting agents, in affecting the primary 
and secondary divisions. Let us, for simplicity, take 
an ideal case, and make a tabular representation of the 
conditions presented. Let an insular society, discon- 
nected from the commercial world, be supposed to 
contain a thousand wool-growers, twenty wool-buyers, 
fifty manufacturers of woolen goods, and five hundred 
merchant-tailors. The series may be represented as 
follows : — 



500 Tailors, and Employes. 
50 Manufacturers, and Operatives. 
20 Wool-buyers, and Assistants. 
1000 Wool-growers, and Employes. 



The total product of the labor of all is the clothing 
of the men of the island. The society contains many 
other groups, each having, as the result of its industry, 
a particular product, sufficient, in quantity, for the 



116 THE LAW OF DISTEIBUTION. 

wants of all inhabitants. The conditions are, of course, 
simplified out of all detailed resemblance to the facts of 
life, and jet present, with the greater clearness, the one 
great fact of actual social economy which crude think- 
ing disregards, to its utter confusion, that, namely, of 
certain necessary and permanent limits of competitive 
action. The formal modification of the above tabic 
which, in a completer discussion, it would be most nec- 
essary to make, is that which would express the relation 
of producers of the cruder materials to several groups 
of producers of the finer utilities. One man may be- 
long to several such groups as those in our table. A 
farmer may raise corn as well as keep sheep, and may 
thus be a member of the group which feeds the insular 
community, as well as to that which clothes it. He 
works in two capacities and receives a specific reward 
in each. In like manner the wool-buyer may sell his 
product to carpet-makers, as well as to makers of cloth, 
and so belong, in so far as a part of his effort is con- 
cerned, to a group which provides a variety of house 
furnishings. The horizontal lines including classes of 
sub-producers need, for a nearer resemblance to the 
complex system of social industry, to be prolonged 
through other general groups. This complication may 
be studied at will; it does not affect one primarily 
important conclusion to which a study of the simpler 
grouping would lead us, namely, that all true competi- 
tion is between similar sub-producers. Resolving the 



THE LAW OF DISTRIBUTION. 117 

complex process popularly termed competition into the 
elements of which, in an earlier chapter, we have found 
that it is composed, we now see that the part which is 
truly competitive, the rivalry in under-selling, is con- 
fined, in every case, between two adjacent horizontal 
lines; while the bargaining process takes place across a 
line. The fifty manufacturers compete only with each 
other ; they buy across the line which separates them 
from wool-dealers, and sell across that which separates 
them from tailors. 

The group which makes clothing for our ideal so- 
ciety contains 1,570 specific producing agencies, each 
having its employes. Wool-growers and wool-buyers 
have some hired men ; manufacturers have many, and 
tailors have their necessary quota. There may be 
15,000 capitalists and laborers in the general group 
which produces the clothing of a hundred thousand 
persons. If the groups were completely distinct, and if 
the consumption of clothing were per capita^ eighty- 
five per cent of the product of this group would be a 
surplus. 

It is a matter of course that the disposable part 
of the product of this group must, in the general 
exchanges of society, purchase wliat its members use 
of the surplus products of all other groups. Our 
15,000 persons get food, dwellings, furnishings, books, 
etc., by selling all the clothing which they do not 
use ; and every other group acts in like manner. This 



118 THE LAW OF DISTEIBUTION. 

is one primary fact in distribution ; but, in itself, it 
fixes the price of no specific product in terms of any 
other. 

It will be remembered that, in the traditional eco- 
nomic science, this principle that surplusses offset each 
other, has been applied to international trade. With 
certain allowances for debts, exports pay for imports; 
and this fact is of importance as bearing on the move- 
ments of currency. Yet, as affecting the distribution 
of wealth, national lines are not of primary conse- 
quence. With due allowance for debts and taxes, 
it is true of any local division whatever that what 
goes out of it pays for what comes into it. This is 
true of a county, a township, or a farm ; that which 
crosses the boundary of either one of these divisions in 
an outward direction pays for what crosses it in an 
inward direction. This fact Avould be worth mention- 
ing if counties, townships, and farms coined money, 
and troubled themselves about the balance of trade ; 
in discussing the distribution of wealth, it is not worth 
mentioning. The outcome of the industry of the world 
is not divided among states, counties, townships, and 
farms ; but among producing groups and sub-groups, 
and then among the capitalists and laborers in each. 

Competition follows necessarily and permanently the 
lines indicated in our diagram. These demarcations 
are made by the nature of the functions of the groups 
thus described. These non-competing groups are 



THE LAW OF DISTRIBUTION. 119 

totally distinct from those discussed by Professor 
Cairnes, which are based on the personal qualities of 
laborers. Of these we shall speak later ; their impor- 
tance in the process of distribution lies in the fact 
that a laborer cannot easily transfer himself from one 
class to another. In the grouping represented in our 
diagram we take no account of personnel. For aught 
that we now know or care, men may pass from group 
to group, — and from generation to generation it is 
certain that the membership must change, — yet, 
through all personal changes the group itself continues 
a distinct thing, separated from every other by the' 
nature of its function. 

It is true, in practice, that migration from group to 
group is not altogether easy, and this fact bears, in 
a manner later to be considered, on the law of Avages ; 
yet, while a man is in a particular group, the limits 
of the competition in Avhich he takes part are fixed 
by this fact. The nail-maker of to-day can compete 
only with nail-makers ; and though he were able to 
become a tailor to-morrow, he would, in the new posi- 
tion, find equally sharp boundaries drawn about his 
competitive action. 

The primary field in which the rivalry in under- 
selling takes place is in the sale of completed products 
to society; the secondary field is in the 'sale of the 
sub-products to classes in the producing groups ; and 
the ternary field is in the transactions which adjust 
wages and profits within the sub-groups 



120 THE LAW OF DISTEIBUTIOl!T. 

In each of these provinces of action there may exist 
three more or less distinct conditions in respect to 
competition. There may be, first, the conservative 
competition in whicli economists of a few years ago 
were able to see realized a general harmony of social 
interests. There may be, secondly, the fiercer contest 
in which eventual success comes to a participant 
through the extermination of rivals, the process well 
named " cut-throat " competition. There may be, 
thirdly, a combination of parties in the strife, which 
produces a monopoly, tempered, as we shall hereafter 
see, by a certain latent competition. The first two 
conditions would seem to shade into one another by 
easy gradations, while the second and the third would 
appear to be the antitheses of each other. The com- 
petitive struggle might, seemingly, progress in fierce- 
ness from a rivalry conducted on a live-and-let-live 
principle to a war of extermination ; while between 
such a war and the combination which excludes all 
strife there would appear to be nothing in common. 
Yet the first process is the result of a distinct set of 
industrial conditions, while the second and third are 
the product of another set. Easy and tolerant com- 
petition is the antithesis of monopoly; the cut-throat 
process is the father of it. 

At the time when economic science was in process 
of formulating, the functions of manufacturer and of 
merchant were merged in a large number of produc- 



THE LAAY OF DISTKLBUTION. 121 

tivc groups. The word " shop," as signifymg a place 
for retail dealing, is, in itself, a record of a compara- 
tively primitive, industrial system in which manu- 
factures were conducted in a multitude of little shops, 
whose owners often retailed their products. Large 
remnants of this system exist in every European coun- 
try; but in America it is a thing of the past. 

The era of manufacturing by hand for local con- 
stituencies was an era of conservative competition. 
Custom played here the part ascribed to it by Mr. 
Mill, as a restraining agency in the struggle ; but that 
custom itself had a basis in a moral sentiment, and in 
the conditions of traffic which afforded to this moral 
force a free field of action. 

In retail dealing, even in our own time and country, 
competition is far more conservative than in most 
industrial fields ; yet the pressure in the direction of 
destructive competition in this department is indefi- 
nitely stronger than before the general introduction 
of machinery into manufactures. It is only large sales 
that can atone for small profits ; and the artizan retailer 
of former times was debarred in two ways from secur- 
ing such sales by means of a reduction in prices. He 
could less easily increase his product than a modern 
retailer can do ; and, secondly, though he were to 
increase the amount produced, he had no assurance 
of increasing the quantity which he might sell. An 
increase in the product of the little shop involved 



122 THE LAW OF DISTRIBUTION. 

more laborers and larger capital. The spirit of the 
time regarded with distrust an attempt of one dealer 
to injure his rivals by selling for less than a normal 
profit. The "good will" of a business was then nb 
misnomer, but signified the personal confidence and 
kindly feeling existing between a dealer and his local 
constituency. He, perhaps, lived and worked where 
his ancestors had lived and worked before him, and 
appeared to inherit a prescriptive right to his cus- 
tomers' patronage. 

The conservative competition in the sale of finished 
products to society transmitted itself through the 
industrial groups, and produced an equally tolerant 
relation among rival sub-producers. The man who 
sold material to the small artificer was, like his patron, 
debarred from great increase in production, and from 
great opportunity for large sales. Custom, based on 
good will and a sense of prescriptive right, governed, 
to a large extent, the sales which took place across the 
horizontal lines separating one producing class from 
another, and made the entire action of competition, in 
its primary and secondary fields, moderate and tolerant. 
The era was one of uneconomical methods of work, of 
divided and localized production, of large profits and 
small sales, of high prices to society as a consumer, of 
little general wealth, but of comparative equality and 
contentment among the middle class in the community. 

What these conditions involved for the working class 



THE LAW OF DISTKIBUTION. 123 

we shall later see ; in the meanwhile we need to notice 
the change in the action of competition, in its primary 
and secondary fields, which resulted from the introduc- 
tion of machinery and the factory system. The con- 
servative influences in the market for completed prod- 
ucts were largely thrust aside by the changes follow- 
ing the- use of steam, and a revolution took place in 
each of three distinct spheres, namely, in working 
processes, in class relations, and in the ethics of the 
market. 

The first effect of the industrial change was the ex- 
termination of the general class of artisan retailers. 
The survivors of the guild-brethren whose shuttles 
wrought all fine fabrics for our ancestors are now 
crowded into a few fields where hand work is prized 
for its own sake. The utility of hand-worked laces and 
embroideries, as badges of social caste, still insures 
their production on a limited scale. Handicraftsmen 
hold, mainly under the protection of fashion, a few 
other fields in precarious tenure. 

The method by which the machine has, in many 
cases, displaced the artisan has been by appealing to 
his own interest as a retailer ; it is by offering to him, 
in his capacity of shopkeeper, goods for less than they 
would cost him as an artificer. The machine, the 
enemy of the tradesman in one of his capacities, is his 
friend in another. An illustration of this process may 
still occasionally be seen. The making of harnesses is 



124 THE LAW OF DISTRIBUTIOlSr. 

not a process in which factory work has a relatively- 
large advantage, and the local tradesman may still 
make and retail them ; yet he can usually buy them iox 
less than it costs him to manufacture them, and, except 
where an extra price is obtainable, on the ground of 
durability, he is compelled by self-interest to allow his 
own work to be driven from the field. 

The mere retailer is able easily to increase his pro- 
duct ; and, in increasing, he cheapens it, by the prin- 
ciple which accords the larger trade discount to the 
larger purchaser. If he can but increase his sales, he 
may lower his prices, to the extent of his larger dis- 
counts, without decreasing his rate of profit; but he 
may also decrease his percentage of profit without 
diminution of his absolute gains. Large purchases 
lower the cost of goods, and large sales more than 
atone for a smaller percentage of profit. Can the large 
sales be secured ? Does the factory system change 
the attitude of a local constituency towards a retailer ? 

It is the man who makes a commodity, rather than 
the man who buys and sells it, who appears to a com- 
munity to have a prescriptive right to patronage ; and 
the strong sentiment of good will, which protected the 
artisan in his shop does not protect the retailer, who 
appears, to popular eye, to be a middle-man intercepting 
the profits of others. Mere interest comes more and 
more to determine where the public will buy its goods, 
and this fact gives a farther impetus to competition in 



THE LAW OF DISTRIBUTION. 125 

the retail traffic. This transmits itself in intensified 
form to the lower sub-groups in the series. The retailer, 
under pressure of competition from men of his own 
class, has no choice but to buy where he can buy the 
cheapest, and competition of the most intense kind 
arises at the very point where, by the old system of 
local manufacture, it was excluded, namely, in the 
transactions between the maker and the vendor of com- 
nlodities. Rapid centralization follows this intense 
competition; productive establishments become few, 
large and ready for the next transition, that, namely, 
to a regime of association and monopoly. The changes 
in working methods that must follow the use of steam 
were dimly foreseen by early inventors ; the ulterior 
effects of it are not yet appreciated. The revolution 
which was brewing in Watt's tea-kettle was threefold, 
affecting the structure of society and the moral nature 
of man. 

Note. — There is, of course, a serious incompleteness in any dis- 
cussion of Distribution which does not consider the Law of Rent. 
The products of which we have spoken, as divided between capital- 
ists and laborers, must, if the traditional theory of rent be tacitly 
accepted, be regarded as consisting of what remains to the produc- 
ing classes after rent has been paid. The traditional theory 
enables us to take this view ; it teaches that rent is the first deduc- 
tion made from the gross returns of industry, and that it is 
determined, in amount, by an independent law. This is not my 
real reason for omitting the discussion of it. The Kicardian Law 
of Rent appears to me to require an extensive supplementing, which, 
for the purposes of the present work, it is better not to attempt. 



CHAPTER VIII. 

WAGES AS AFFECTED BY COMBINATIONS. 

Certain opponents of Mr. Henry George have 
committed tlie strategic error of attacking his system 
at an impregnable point, namely, his theory of the 
origin of wages. In the third chapter of "Progress 
and Poverty" he has proved that they come, not 
from capital, but from products. He has, indeed, 
fallen into an error greater than tha^ which he re- 
futes, in ignoring the productive action of capital. 
The product of which he speaks is that of " labor " 
alone ; the employer takes the whole of it, returns a 
part as wages, and lives on the proceeds of a quasi- 
fraud. Of capital as a joint producer, and of the 
consequent claims of the man who owns and uses it, 
the theory takes no due account. On the single point, 
however, that products are the source from which the 
laborer derives his maintenance, Mr. George's reason- 
ing is as conclusive as anything in mathematics. 

The Wage-Fund doctrine once prevalent maintained 
that the laborer's pay comes from a portion of capital 
antecedently set apart for that purpose. Some influ- 
ence, the nature of which has not been clearly ana- 
lyzed, has predetermined that the whole of this fund 



WAGES AS AFFECTED BY COMBINATIONS. 127 

shall be used in wage payments. If the number of 
laborers be constant, the rate of wages must vary 
directly as the size of the fund. If the fund be con- 
stant, the rate of wages must vary inversely as the 
number of laborers. The problem resolves itself into 
a simple question of arithmetical division. Though 
this crude form of the doctrine may be antiquated, 
there are still many writers who retain so much of 
it as to argue vigorously that wages are paid from a 
fund of capital antecedently accumulated. 

The key to the problem lies in the distinction be- 
tween a wage payment regarded as a value, a thing 
of pure quantity, and a wage payment regarded as a 
mass of concrete commodities of a kind adapted to 
the laborer's use. It is one thing to determine from 
what sum the amount of wealth represented by wages 
is deducted, and quite a different thing to ascertain 
how that abstract quantity comes to embody itself 
in bread, meat, clothing, implements, etc. If the 
laborer can get the value which he requires for his 
services, he can embody it in the necessary forms by 
a process of exchange. As a problem in distribution 
the present inquiry is. What is the real source of the 
value which rewards the laborer ? 

Labor adds to the wealth of its employer. The 
addition is necessary and continuous; from the mo- 
ment when the mill begins to run to the moment 
when it stops, labor, assisted by capital in different 



128 WAGES AS AFFECTED BY COMBINATIONS. 

forms, is increasing the possessions of the man or the 
company that employs it. Let the wheel of the en- 
gine make a dozen revolutions ; there is an inch more 
of cloth upon every loom. The employer recognizes 
this addition to his assets, and would not fail to take 
account of it if he were making an accurate inventory. 
All through the day and the week the sum of his 
wealth is growing ; and when he pays his men on 
Saturday night, he takes the amount of their wages, 
if pure quantity alone be considered, from the value 
that has come into existence during the working days. 

Let a man pump water into a full tank, and get 
what he wants for use from the overflow ; does the 
water for consumption come from the tank or from 
the pump? In a sense from both; and if imj)ortant 
interests were dependent on the answer given, there 
would be here an opportunity for a fierce logomachy 
like that which has actually arisen over the origin of 
wages. The particular drops which are used come 
immediately from the tank; but the amount in it is 
undiminished, and the draught virtually comes from 
the supply furnished by the pump. Moreover, the 
size of the tank has no influence on the amount of 
the overflow ; that is gauged by the volume of the 
inflowing stream. In like manner wages are taken 
immediately from a reservoir of capital ; but the 
amount in that reservoir is undiminished, since the 
quantity which is drawn from it has already been 



WAGES AS AFFECTED BY COMBINATIONS. 129 

added to it by the stream of products resulting from 
industry. It is the volume of products which sets 
limits to the amount of wages. 

The hydraulic figure will, perhaps, bear straining 
to the extent of representing one other fact in the re- 
lation of capital to wages. If the water which over- 
flows from the tank be regarded as better in quality 
than that which is pumped into it, if, for example, it 
loses its sediment by standing, the service rendered 
by the reservoir corresponds to a certain useful office 
performed by capital. The quality of what the work- 
man receives is of importance to him, as well as its 
quantity. It needs to come to him in available forms. 
" The ploughman cannot eat the furrow," says Mr. 
George, though the furrow is wealth, and a share 
of it is wages, in the sense in which the term is used 
in Distribution. The weaver cannot eat the cloth 
upon the loom, nor can he even wear it. He must 
exchange it, or the employer must do so for him. 
Society must take it, and return bread, clothing, etc. 
This exchange demands social capital; it would be in- 
teresting to inquire how much, but the inquiry would 
take us into another department of economic science. 
It is safe to assert, without waiting for a full demon- 
stration, that society does not lack the capital that is 
requisite for the purpose, and that wages are not kept 
down by any lack of means of exchanging them 
as the needs of the laborer may require. 



130 WAGES AS AFFECTED BY COMEil^ATiOJSS. 

Wages, in the primary sense of the term, are the 
workman's share in the value createcl by the industry 
in which he participates. They are a quantity of 
wealth, as determined by a process in Distribution. 
In a secondary sense they are that abstract value as 
embodied in available forms by a process in Exchange. 

There is, then, a question of division at issue be- 
tween the workmen and their employers. That divi- 
sion may be regarded in general or in detail ; wages 
as a whole and profits as a whole come from a cer- 
tain aggregate sum; the wages of particular groups 
of workmen and the profits of their employers come 
from distinguishable portions of that aggregate. The 
reward of the working class as a whole comes from 
the total value of the completed products of society; 
that of particular workmen and groups of workmen 
comes from the value of specific sub-products. In terms 
of our diagram the amount falling to L, L', L", etc., 
taken as a whole, comes from the value of the prod- 
uct, nails ; while the share of L comes from 1st Sub- 
P., that of L' from 2d Sub-P., etc. The wage in a 
particular case is determined, first, by the amount of 
the sub-product from which it is taken, and secondly, 
by the terms of the division between C and L. As- 
sign fixed proportions of the sub-product to capital and 
to labor respectively, and the reward of each will 
vary directly as the sub-product. This would be the 
case in a system of cooperation, or in one of profit- 



WAGES AS AFFECTED BY COMBINATIONS. 131 

sharing of a certain kind. Let the sub-product be a 
constant quantity, and wages and profits will vary 
according to the division between them. 

The historical fact of the past three hundred and 
fifty years has been that real wages have declined for 
three centuries and advanced for a half-century. The 
decline was not continuous; there was a rapid fall, a 
partial recovery, and a second fall, leaving the work- 
men, in other than specially favored countries, in 
extreme wretchedness. This great decline in wages 
took place during an era of generally conservative 
competition; while the advance which has followed 
it has been recent, and has taken place in an era 
in which the money-getting spirit has overcome the 
former conservative influences, and in which compe- 
tition, in the fields in which it survives, has been 
of an unsparing character. Both of the determining 
causes above mentioned have contributed to this 
result. There has been a vast increase in the quan- 
tity of wealth produced; and this fact may have suf- 
ficed to increase the laborer's reward without any 
enlargement of his proportionate share of the sub- 
product. Whetlver the division is, at the present day, 
taking place on terms more favorable to the laborer 
than those which ruled fifty years ago is of far less 
consequence than the question whether the present 
principle of division is one which must yield perma- 
nently better results than the old one. That real 



132 WAGES AS AFFECTED BY COMBINATIONS. 

wages are high this year is of little importance in 
comparison with the fact that they are adjusted by a 
process which promises to make them higher next 
year, and still higher in the years following, a pro- 
cess which offers a permanent guaranty against the 
resumption of the hopeless downward tendency which, 
under the former system, was regarded as "natural." 

The old principle of divisi^sn rendered gross injus- 
tice inevitable ; the present principle makes equity 
possible. A fair bargain demands either a desire for 
justice on the part of the participants, or strategic 
equality between them. The weak and the powerful 
may deal equitably with each other if justice rather 
than selfish interests be the end in view: in the 
absence of this moral force weakness must be matched 
against weakness, and strength against strength. A 
maximum of justice in distribution is attained where 
the brute forces are evenly matched, and where moral 
influences are efficient. A minimum of justice results 
where brute forces are unequal, and moral forces 
wanting. 
I The phenomenon of the long era of declining wages 
was the concurrence of strategic inequality between 
capitalists and laborers, with a certain disorganization 
of the moral forces of society. The crude forces of 
capital and labor were not as unequal as they might 
have been, and moral forces were not utterly wanting. 
The general ethics of the market may have been bet- 



WAGES AS AFFECTED P.Y COMBINATIONS. 133 

ter than those which have prevailed during the hist 
few decades. The lack in this direction has been of 
organization. The moral forces in distribution have 
not been distinctively social forces, but have acted 
sporadically upon individuals. 

For the present we have to consider the brute 
forces of distribution. The employer is, as we have 
seen, the purchaser of the laborer's share of a sub- 
product. In the transaction capital is necessarily a 
unit. Whether the employer be an individual or a 
corporation, it is as though there were but one man 
wielding the force of the entire capital of a produc- 
tive establishment, in the effort to secure advanta- 
geous terms from the workmen. If, now, the workmen 
act not collectively, but individually, if they compete 
vigorously with each other for employment, they di- 
vide their forces against themselves, assist the capital- 
ist, and forfeit all hope of a successful issue of the 
contest. The army of labor fires, as it were, into its 
own ranks. The distributive phenomena of the past 
have been distinctively those of unbalanced competition. 

The strategic inequality in the position of capital- 
ists and laborers would be at a maximum if there were 
but one employer in a locality, and if employes were 
numerous, unorganized, and unable to migrate. If, 
in addition to this, the ethico-economic rule of "every 
man for himself" were a recognized principle of ac- 
tion, the result would be a society composed, indeed. 



134 WAGES AS AFFECTED BY COMBINATIONS. 

of men, but completely dehumanized in its organic 
action. It would be a collective brute. 

Such a condition was hot fully realized, but was 
approximated during the period of declining wages. 
The degree of approximation sufficed to reduce wages 
to a starvation limit. There was some competition 
among employers ; their shops were small and rela- 
tively numerous. There was an appreciable chance 
of realizing the condition described by Cobden, by 
the formula, "two bosses after one man"; but this 
chance was indefinitely more than offset by the greater 
frequency and intensity of the struggles of the men 
to secure employment from the " one boss." 

Aside from the greater unity of action on the side 
of capital, there was a source of unfairness in the dis- 
tributive contest in the unequal motives of the com- 
petitors on the different sides. The impulse to raise 
wages never equalled the impulse to depress them. 
The employers had less at stake in the struggle to 
enlarge their working forces, than had the laborers 
in the contest for employment. The man without 
work must obtain it or starve ; the employer with 
too few hands must content himself with smaller 
gains than he would like to realize. The man hav- 
ing to choose between something and nothing, might 
soon be compelled to take half-pay. On the other 
hand, employers, even in the prosperous seasons in 
which they compete with each other for men, have 



WAGES AS AFFECTED BY COMBINATIONS. 135 

no interest in raising wages to the extent of lessen- 
ing their aggregate profits ; and this point is usually 
reached after a relatively moderate rise. Employ- 
ment at half-pay might save a man from starvation; 
but the payment of double wages would, in most 
cases, speedily bankrupt the employer. 

If these sources of inequality, even in the age of 
small industries, left to the laborers nothing but a 
precarious subsistence, what was to be expected from 
centralization ? In each producing centre, a score of 
little shops have yielded to a single great establish- 
ment, and if the laborers had remained unorganized, 
the competitive process would have been thrown 
more hopelessly out of balance ; strife among em- 
ployers to secure workmen would have been lessened, 
and that among men to secure employment "would 
have been increased. In addition to this the spirit 
of the market has undergone a change ; conservative 
influences have been thrown off, and the struggle 
for gain lias become undisguised and intense. Under 
such circumstances, the fate of the workingman, were 
he acting in isolation, Avould indeed be sealed ; his 
condition would be determined by a struggle of 
brute forces, and these would stand as ten to one 
against him. Yet the historical fact of the past 
half-century has been that the workman's condition 
has improved. He has thriven on centralization and 
an intense struggle for existence. 



136 WAGES AS AFFECTED BY COMBINATIONS. 

Of the two possible causes of higher wages both 
have been in action in recent years ; there has been 
more to divide, and the division has been made under 
more equal conditions. The influence with which 
we are immediately concerned is the equalization 
\ which has taken place in the brute forces, of dis- 
tribution. A more nearly balanced competition has 
replaced the former one-sided process. Massed labor 
has been pitted against massed capital, by trades 
unions, and by the more recent and general union of 
the Knights of Labor, which aims ^ — with what per- 
manent result remains to be seen — to secure the 
solidarity of the entire working class. 

It will be seen that the twofold process of first 
throwing competition out of balance and then restor- 
ing its equilibrium, has had the effect of ruling a great 
part of it out of existence. The equality lias been 
secured, not by restoring competition on the side of 
capital, but by suppressing it on the side of labor. 
•As the growth of a great corporation, absorbing all 
small establishments in a locality, suppresses compe- 
tition among employers, the growth of a well-organ- 
ized trades union suppresses it among workmen. If 
both, processes were consummated, and one corporation 
produced the entire supply of a particular article, while 
a trades union controlled the entire labor force avail- 
able for its production, actual competition would be at 
an end, and the division of the product would be effected 



\VA(i^:S AS AFFECTED BY COMBINATIONS. 137 

by a bargaining process untempered by any of the con- 
servative influences by which, in an open market, 
contracts are actually made. There would be no alter- 
native buyei's and sellers ; the laborers would be com- 
pelled to sell their share of the product to the one 
corporate employer ; and that employer would be 
compelled to buy the product of the trades union, 
which, in a sense, is a single corporate laborer. The 
adjustment, if left to be effected by crude force, would 
produce disturbances too disastrous to be tolerated, and 
arbitration on a comprehensive scale would be a prime 
necessity. 

This condition is, as yet, only approximated. The 
solidarity of labor and capital is very incomplete. Cor- 
porations have not become absolute monopolies in their 
respective fields; trades unions do not include all work- 
men. The bargaining process between capital and labor 
is not the blind and desperate struggle that it might be. 
It is tending towards that condition, and becoming, in 
a corresponding degree, dependent on arbitration. 

The solidarity of labor has developed, -first, in the line 
of occupation, and, secondly, in a line independent of 
occupation. Trades unions are old ; the organization 
of the Knights of Labor is new. They represent 
respectivel}^ two distinct economic conditions, of which 
the one is characteristic of the past and the other of 
the present. In the one condition trades are dominant 
in the field of industry ; in the other they are of reduced 
importance. 



138 WAGES AS AFFECTED BY COMBINATIONS. 

The factory system, witli its differentiation of manu- 
facturing processes, has given to the term skilled labor 
a significance quite distinct from that which formerly 
attached to it. The difference between the skilled and 
the unskilled workman was once largely personal. The 
one had attained, by a long course of industrial educa- 
tion, a mental and physical status which made him, for 
economic purposes, a different being from the other. 
Native endowment played a large part in broadening 
the line of demarcation ; men adopted trades for which 
nature, hereditary or otherwise, had fitted them, and 
attained a success beyond the reach of the personally 
unfit. The subdivision of labor has reduced the differ- 
ences between trades, by reducing the trades themselves 
to a minimum. The occupation of watch-maker once 
involved an ability to make an entire watch ; and the 
person who could perform this difficult industrial func- 
tion was in no danger of competition from any but the 
few who, like himself, had been able to serve the needed 
apprenticeship. This trade, in the full sense, no longer 
exists. In its place are a score of far simpler trades, 
each limited to the performance of a minute portion of 
the watch-making process. The functions requiring 
especial deftness and accuracy have been handed over 
to machines, and the difficulty of becoming a member of 
the watch-producing group has been reduced to a 
minimum. Though the occupation now demands far 
less of personal superiority, native and acquired, than 



WAGES AS AFFECTED BY COMBINATIONS. 139 

was formerly necessary, yet, on the other hand, it 
develops greater actual dexterity. The little that the 
artisan now does he does exceedingly well. In a sense, 
therefore, nearly all the labor engaged in manufacturing 
processes is highly skilled ; yet but little of it requires 
the personal attainments which were necessary under 
the old regime. 

The subdivision of trades is not equally practicable 
in all departments, and some occupations still demand 
skilled labor in the original sense of the term. It is 
noticeable that in such occupations trades unions are 
especially vigorous. No industrial development has 
yet lessened tho skill and the moral quality required of 
a good locomotive engineer, and the brotherhood of 
men of this craft is one of the strongest of the guilds. 
Building trades, type-setting, and not a few other em- 
ployments, are conducted by methods so similar to 
those which prevailed in the old era as to furnish a 
basis for vigorous organizations within the lines drawn 
by occupation. 

Where, however, the subdivision of trades has pro- 
ceeded to considerable lengths, the effect has been to 
lessen the efficiency of the trades union for the purpose 
for which it was designed. It can less easily control 
the market for a particular kind of labor. The brother- 
hood of locomotive engineers has a certain control of 
the market for its own kind of labor, because its mem> 
bership includes a large majority of those who practise 



140 WAGES AS AFFECTED BY COMBINATIONS. 

the craft, and because the difficulty of acquiring the 
art renders new men for a long time useless. 

In trades which have been so subdivided that the mas- 
tership of a few simple operations is all that is required 
of one workman, the case is different. The members 
of a craft like this stand more nearly on a plane with 
the army of the unskilled. Though a union were to 
embrace all who now practise such an occupation, it 
would be impossible to include all who are capable of 
practising it after a brief apprenticeship. It certainly 
cannot include all the Chinese, Hungarians, and Ital- 
ians. In most cases it by no means includes all Ameri- 
cans who are now masters of the trade : and a strike, 
though sustained by the entire brotherhood, cannot 
compel an employer to make concessions, miless it can 
prevent him from resorting to the reserve force of the 
unemployed. For the preventing of such a resort there 
are two methods: first, coercion, crude or refined, which 
shall prevent men from taking the places vacated by 
striking craftsmen ; and secondly, the formation of a 
labor organization which shall proceed independently 
of occupation, and endeavor ultimately to include the 
reserve force from which, during a strike, the employer 
may draw a new quota of men. 

Both of the above methods are now in operation ; 
potent influences deter non-union men from accepting 
work while a strike is pending; and a strong effort is 



WAGES AS AFFECTED BY COMBINATIONS. 141 

making to unite all labor in a general guild. The novel 
feature of the former process is the use of the boycott. 
This is a mode of coercion applied to employers, not 
only for the purpose of extorting direct concessions 
from them, but for the purpose of indirectly coercing 
the non-union men. The object for which it is most 
frequently used is to compel employers to retain onl}- 
members of the guild in their service. The coercive 
agency consists in the cutting off of the market for the 
employer's products. 

Were these products sold directly to the workmen, a 
sufficiently extensive labor union could effectually boy- 
cott the producer by simply refraining from the pur- 
chase of the articles. In most cases the direct customers 
for the goods do not belong to the working class, and the 
boycott, in order to reach the producer, must attack the 
retailers who sell his products. These are numerous, 
and a boycott which passes only to the second degree 
must often coerce scores of men in order to extort the 
desired concession from one. Yet boycotts of the third 
degree are frequent. A newspaper is coerced by com- 
pelling the withdrawal of profitable advertisements ; if 
the advertisers are manufacturers, the}' must be reached 
through the retail dealers. 

The ultimate weakness of the boycott, as an instru- 
ment for benefiting the laborer, lies in the necessity 
for thus widening the circle within which it is applied. 
The disturbances created by it are out of all [)roporti(ii: 



142 WAGES AS AFFECTED BY COMBINATIONS. 

to the ends secured. In slightly benefiting a class, it 
inflicts a large injury upon society. Even more than 
the strike does the boycott need to be held in reserve, 
with masterly strategy, and seldom actually applied. 
The ultimate power to boycott, if skilfully used by the 
director of a labor organization, may force many con- 
cessions from employers; the frequent ajDplication of 
the force must speedily defeat its own ends. The sur- 
prising degree of success which the boycotting system 
in its early stages attained, is not to be anticipated 
hereafter, unless it is used with consummate wisdom. 
It is ruinous policy to push it beyond what may be 
termed the tolerance of society. 

The success of the boycott, when kept within pru- 
dent limits, lies wholly in the power of federated labor 
to dictate the conduct of retail dealers ; and this power 
is based on competition. It is the existence of rival 
dealers that is the decisive fact in the situation. The 
boycott promises to benefit the dealer who submits to 
it, at the cost of all who resist. The labor union ap- 
proaches the retailer not merely with a threat, but also 
with a promise. If A complies with its demand while 
B, C, D, and E resist, the union will turn to A's shop 
a large part of the patronage of the other four. An 
anti-boycott union among retail dealers needs to be 
universal, in order to be effective ; and, in the absence 
of such a complete concert of action, a merchant of 
this class is interested to secure, by a prompt surrender 



WAGES AS AFFECTED BY COMBINATIONS. 143 

to the boycotters, an immunity from harm and a pos- 
sible benefit. If fully organized, retailers might be 
capable of valor in an encounter with labor unions ; 
as unorganized, they, as a rule, strive only to outdo 
each other in discretion. 

Even when the ends for which it is used are eco- 
nomic, the boycott, as an instrument, is extra-economic 
and definitely illegal. Narrow policy on the part of 
laborers demands an exceedingly limited use of it; 
broad policy dictates a line of conduct identical with 
that demanded by morality, and that is the total sup- 
pression of the practice. From this time onward the 
success of labor unions depends on the strength of their 
moral position ; and it is indefinitely better for them 
to voluntarily relinquish an illegal practice than to be 
forced to do so by officers of the law. 

Rapidly as organizations of workmen have lately 
grown, the solidarity of capital is, thus far, greater than 
that of labor. Eight men have been said to control the 
production of anthracite coal, and combinations of 
similar character control that of lumber, glass, nails, 
gunpowder, rope, cutlery, and a hundred other staple 
articles. In the language of our formulas, the non-com- 
peting groups are solidifying into great corporations; 
and as competition between the producers of dissimilar 
sub-products is impossible by nature, that between the 
makers and vendors of the same sub-product is being 
suppressed by art. Nail-makers cannot compete Avith 



144 AVAGBS AS AFFECTED BY COMBINATIONS. 

cloth-makers, and they do not compete with each 
other. 

The object of these combinations is to control the 
prices of products. They operate in what we have 
termed the primary and secondary fields of distribution, 
while labor unions operate in the ternary. Employers 
combine against the public, and workmen against em- 
ployers. The associations of capitalists are able to act 
directly against striking and boycotting workmen, and 
are, indeed, beginning to do so. This is, however, a 
new field for their action ; and even in their original 
field their operation reacts in two ways upon real 
wages. 

I The raising of the price of a commodity produced by 
j a confederation of employers is possible only by curtail- 
I ing production. If the price is raised while production 
\ is unrestrained, goods accumulate till forced sales are 
Necessary, and the combination is broken. 

It is for the interest of every group that its produc- 
tion of commodities should be small, and that of other 
groups large. In that case the terms of exchange 
between the one group and the others will be favorable 
to this particular group. By making less nails one par- 
ticular class of producers secure for themselves more 
food, clothing, etc. Of c6urse this is at the cost of the 
other groups, and when they retaliate by a curtailment 
of their own production, the gain of the nail-makers 
is more than neutralized, and new injuries are inflicted 



WAGES AS AFFECTED BY COMBINATIONS. 145 

on all. Under free competition the production of each 
commodity tends towards a normal quantitative limit, 
at which point labor is, with allowance for certain vari- 
ations, as well rewarded in that industry as in others. 
If a single industrial group were to curtail its produc- 
tion beyond the normal limit, it might gain, but society 
would suffer ; while the outcome of a general artificial 
curtailment would be a general social injury. 

The gain which comes to a particular group by a 
lessening of its production accrues mainly to em- 
ployers; the injury which it suffers from a similar 
action on the part of other groups falls largely on the 
men. If nail-producers can so limit their output as to 
secure a price higher by a half than the one formerly 
prevailing, they can retain most of the gain for them- 
selves. Wages in this single industry cannot be greatly 
raised independently of the general labor market. A 
demand made at the moment when the price of nails 
rises may give to the workmen a portion of the gain 
realized by their producing group; but the gain cannot 
raise these workmen far above the level of others, while 
the increase of the employer's profits may be much 
greater. 

On the other hand, the workmen suffer most from the 
injury which is entailed upon society by artificial re- 
strictions u^ion production. They are preeminently 
consumers. They compose a large numerical propor- 
tion of society; they consume the largest portion 



146 WAGES AS AFFECTED BY COMBlaSTATIONS. 

of their incomes, and they spend it largely for things 
which they cannot forego without privation. For these 
three reasons they are specially sensitive to the injury 
resulting from enhanced prices of articles of ordinary 
consumption. 

There is a second way in which employers' combina- 
tions react detrimentally upon wages. A curtailment 
of the production of a particular commodity means a 
lessened demand for labor within the group which 
produces it. A struggle between the groups to outdo 
each other in limiting production would mean, to the 
laborers, an effort on the part of each group to thrust 
laboring men into other groups. As the attempt 
becomes general, the result is a thrusting of laborers 
either into the reserve force of the unemployed, or into 
the one department in which employers' combinations 
are impossible, namely, agriculture. The power- of 
agricultural industry to absorb the working force ex- 
cluded from other fields is becoming limited, and the 
army of the unemployed must receive an increasing 
proportion of them. The reaction of this fact upon the 
reward of labor is direct and resistless ; no combination 
of workmen can undo the depressing effect upon their 
own wages of the presence of a large force of idle men. 
Upon the men thrown out of employment the effect of 
curtailed production is obvious ; it is equally so upon 
society. It means pauperism, crime, embittered con- 
tests, and an added strain upon republicanism. 



WAGES AS AFFECTED BY COISIBINATIONS. 147 

Although it ^^^as not the original object of employers' 
unions to directly oppose trades unions, the present 
tendency of labor movements is to make it morally 
certain that they will be used for that purpose. This 
wholesale suppression of competition will bring society 
to a point from which the only outcome consistent with 
peace will be arbitration under governmental authority. 



Rapid progress in this direction is the great economic 
fact of the present day. Competition still exists and, 
within certain fields, is active. There is competitive 
action among merchants, among railroads not in a pool, 
among manufacturers not in a combination, and among 
workmen outside of a union. Moreover, tlie latent 
possibility of competition among the members of a 
combination is an economic fact of vast importance to 
society. Yet the fact remains that, in the field where 
its work is the most important, in the division of the 
products of industry between groups, sub-groups and 
classes, competition of the individualistic type is rapidly 
passing out of existence. The principle which is at the 
basis of Ricardian economics is ceasing to have any 
general application to the system under which we live. 
The problem of the future is the extent to which 
movements now in progress will actually go. In their 
possible scope they are highly revolutionary. Solidarity 
carried to its logical consummation would create a 
social condition so utterly unlike the present one that 



148 WAGES AS AFFECTED BY COMBINATIONS. 

it could hardly be established without violent overturn- 
ings. 

The immediate subject for economic study is the con- 
dition to which the movement has already brought us. 
The present state of industrial society is transitional 
and chaotic. The consolidation of labor is incomplete, 
that of capital is so ; and the relation between the two 
is not what it was yesterday, nor what it will be 
to-morrow. Yet something may be said of social con- 
ditions existing in the interim between the old and the 
new. The crudeness of the transitional system has 
begotten lawlessness. Labor is employing irregular 
methods in the contest with capital ; capital is using 
injurious methods in its dealings with society. Indi- 
vidual competition, the great regulator of the former 
era, has, in important fields, practically disappeared. 
It ought to disappear ; it was, in its latter days, inca- 
pable of working justice. The alternative regulator 
is moral force, and this is already in action. It is 
accomplishing much, though it is in the infancy of its 
distinctively social development. Xhe system of indi- 
vidualistic competition was a tolerated and regulated 
reign of force ; solidarity, even in its present crude 
state, presents the beginnings of a reign of law. 



CHAPTER IX. 



THE ETHICS OF TRADE. 



A WORKING MAN, who is well versed in political econ- 
omy, once told me that the reading of Ricardo had con- 
vinced him that there is no hope for the laboring class 
under the existing system of industry. Competition, as 
he was compelled to think, mnst sooner or later reduce 
workmen to the starvation limit, and keep them there. 
In times of exceptional distress, it must drive them be- 
low that limit, and only restore them to it through the 
lessening of their number by actual death. His hopes 
for the future of his class were founded on a change in 
the industrial system, which should substitute coopera- 
tion for competition. 

This man is representative ; his premises are those of 
Ricardo and his school, and his conclusions are those to 
which many readers are forced.* This fact explains the 
popularity of othodox economic literature among de- 
clared socialists. It prepares the soil for revolutionary 
seed. A demonstration of the hopelessness of the old 
economic system is, to a man who retains his natural 
optimism, equivalent to a proof that a new system is 
coming. The new era has, in fact, begun, but it has 
not brought socialism. 

* Ricardo's own conclusion was different; his "natural price of labor" 
was not literally a starvation rate. 



150 THE ETHICS OF TRADE. 

• The weakness of Ricardianism is known to lie in its 
premises ; these are sweeping assumptions at variance 
with the facts of life. It may now be seen that the 
fundamental principle of this scientific system, that of 
free individual competition, is not permanent, and that 
the industrial regime to which the old science was in- 
tended to apply is self-terminating. There is a promise 
of an industrial revolution in the very laws of Ricar- 
dianism. 

The purely competitive system of industry has had 
its youth, its manhood and its decrepitude. It has de- 
veloped, first, a conservative rivalry, then a sharp and 
destructive contest, and, finally, a movement toward 
consolidation and monopoly. The jfinal stage has but 
lately been reached, and the system of distribution 
which characterizes it is, as yet, imperfectly developed. 
Moral force as an economic agent is the characteristic 
of the new regime. This agent is new only in the field 
of its operation and in the extent of its work. In itself 
it is an old and ultra-orthodox economic force. It is a 
radical error which represents competition itself as the 
outworking of unmixed selfishness. There is an ele- 
ment of morality in it ; it is a restrained and qualified 
strife, and owes such continuance as it has had to the 
forces that have held it within bounds. An unrestricted 
struggle for wealth is impossible in any collection of 
men that can be termed a society; it has never existed, 
in fact, since the time of Adam. It would be a savage 



THE ETHICS OF TRADE. 151 

and ignoble strife, in which every man's hand would be 
against his neighbor. Deprive a pack of wolves of the 
tribal instinct that keeps them from rending each other, 
and place a single carcass before them, and their con- 
duct may illustrate the economic system which would 
result from the unrestrained action of selfish motives 
among men. 

Competition without moral restraints is a monster as 
completely antiquated as the saurians of which the geol- 
ogists tell us. To find anything approaching it in actual 
life we must go farther back than history reaches, be- 
yond the lake-dwellers of Switzerland and the cliff 
villagers of neolithic times, quite to the isolated troglo- 
dyte, the companion of the cave bear. Even here the 
illustration will be incomplete ; for the troglodyte had a 
family, and, within the precinct of his home, was ruled by 
higher motives. The intercourse of this rudest of men 
with others of his kind may, however, be conceded, 
safely enough, in the absence of evidence to the con- 
trary, to have been dictated by the lowest of motives, 
and to have tolerably well illustrated the process of 
unrestrained competition. The supposition may be a 
slander on the troglodyte ; but as he is now past hear- 
ing of it, and is not present with his club to avenge it, 
we may admit the supposition that the intercourse of 
the isolated cave-dwellers with each other presented an 
illustration of competitive strife unqualified by moral 
forces. Two wild huntsmen pursuing the same animal, 



152 THE ETHICS OF TRADE. 

and then clubbing and tearing each other for the posses- 
sion of its body, may illustrate the process. 

Though such may have been the conduct of cave- 
dwellers toward each other outside of the family circle, 
it is certain that, within that circle, the passions else- 
where predominant were restrained by sentiments of 
affection ; and in this we have the germ of a series of 
most important phenomena. In this case love toward 
relatives and enmity toward neighbors are the ruling 
motives. The differing motives dictate opposite lines 
of conduct. Reflection serves to define and formulate 
the two opposite modes of action ; that which is cus- 
tomary in the treatment of relatives and that which is 
characteristic in the treatment of enemies come to be 
understood and recognized, and a rude code of rules is 
formed for the guidance of numbers of the favored 
circle in their treatment of each other. Gradually, 
from the depths of a nascent faculty of reason, a deeper 
intuition than any yet experienced comes to lay its 
sanction on the code which family affection and custom 
have established. In the vivid picture-language of 
Genesis, the fruit of " the tree of knowledge of good and 
evil " is plucked. A rude perception of right and wrong 
is attained. The glimmering light of a moral principle 
that is to direct the development of the race makes 
itself for the first time perceptible, and the troglodyte 
is no longer as an animal, innocent because ignorant, 
but "as a god, knowing good and evil." Such is, 



THE ETHICS OF TRADE. 153 

perhaps, the teaching of Genesis and the guess of 
science concerning the origin of moral influences in 
human society. 

The code of right and wrong is, at first, confined to 
the family ; but in time sufficiently close intercourse is 
established between neighboring families to develop 
common ideas of right and wrong in matters pertaining 
to a larger circle, and the moral code extends itself to 
the neighborhood. Neighborhoods unite into tribes, 
and the process repeats itself. In time the final step 
is taken ; the moral code receives the sanction of a 
legal enactment, with penalties for violation, and is 
thus enabled to exert its greatest influence. The 
competitive system has now received definite limita- 
tions within the circle where the ethical influences are 
exerted. 

The growth of these influences, in both an extensive 
and an intensive way, is a matter of history. They 
have grown extensively as tribes have united into 
nations, and as nations, by the development of inter- 
national law, have taken on the rudimentary form of 
what promises to be a world state, an organic unity 
bounded by no narrower limits than those of the globe 
we inhabit. There is no quarter of the world, at 
present, unreached by ethical influences, and none, 
consequently, where the competitive impulse is not 
subject to some limitations. 

Intensively these moral forces have grown with general 



154 THE ETHICS OF TKADE. 

civilization, acquiring, within a given local circle, a 
constantly increasing power, and restricting the wealth- 
getting process more and more. The crude competi- 
tion which spared neither life nor limb gave place to 
a method which respected the lives of the contestants ; 
murder, as an economic process, was prohibited, while 
robbery was still tolerated. Human bodies were first 
excluded from the list of articles to be competed for. 
It was a sort of legal exemption, the first and most 
beneficent of homestead laws. The dwelling which 
the soul of man inhabits might not be seized by his 
creditors and the occupant ejected. 

A farther moral development extended the protec- 
tion of the law to outward possessions, suppressing first 
open robbery, and then obvious fraud, and extending 
its influence ultimately to those refined forms of coer- 
cion and deceit of which a large survival remains to 
be dealt with- 

From the time when the institution of property was 
put upon a moral basis the nature of the competitive pro- 
cess changed. In the primitive state it was a struggle to 
secure a de facto possession ; in the civilized state it is 
a struggle to secure lawful possession. This is possible 
only by creating something of value, or by receiving it 
from a previous owner by a voluntary cession. Useful 
articles are not relinquished without an inducement; 
and here is the basis of the system of exchanges which 
is the distinctive phenomenon of civilized society. 



THE ETHICS OF TRADE. 156 

Those who desire an article of value must seek to 
outdo each other in offering to its possessor induce- 
ments to part with it. Rivalry in giving is, therefore, 
the essence of legitimate competition. It is the func- 
tion of moral influences to see to it that the process 
retains this character ; it is, in fact, constantly losing 
it, and lapsing into the cruder state. The refinements 
of force and fraud which are beyond the reach of 
statute law, are still used in securing de facto posses- 
sion without moral right. Competition, in the new era, 
is indeed debarred from certain extensive fields ; but 
in others it survives, and it is of vital importance that 
its methods be made legitimate. 

Sir Henry Maine has shown that the family system, 
which excluded competition entirely, extended itself 
to the village community, which was the germ of 
the modern state. Within the village all relations 
were fraternal, and property was held largely in com- 
mon ; while on the mark, or boundary, the germ of the 
modern market, the relations were somewhat hostile. 
It was on the mark that members of different com- 
munities met to buy and sell. Here they were free 
from the moral influences which existed among mem- 
bers of the same community, and mercantile processes 
were, therefore, relatively unrestrained. Here there 
was " higgling," the contention between buyers and 
sellers ; though there was but little of that true com- 



156 THE ETHICS OP TEADE. 

petition, the rivalry in giving, which is the character- 
istic of modern trade. 

Tlie highly developed family code acquired its 
greatest field of action in the mediaeval village. 
The local circle within which mercantile action is 
excluded has been reduced to a zero ; but, in com- 
pensation, much of the humanity which characterized 
the dealings of villagers with each other has extended 
itself to all members of society in their non-mercantile 
relations. The mark, as such, is now extinct ; and, 
in western countries, the village community is so. 
Modern society consists of a fusion of the two, and 
bears the stamp of each of the elements that com- 
pose it. In some of its activities the modern com- 
munity resembles the mark ; in others it resembles 
the village. This dualism is most apparent and most 
harmful in the domain of practical morals. 

The tribal conscience formerly developed fine sensi- 
bilities ; the inter-tribal conscience was cruder, and 
tolerated mercantile contention and the recognized 
" tricks of trade." The man of the present day is 
actuated, now by one infl.uence, and now by the 
other, and has two distinct codes of outward conduct. 
Moral philosophy, indeed, teaches that his fundamental 
character is one and unchanging ; but as there is one 
code of practical conduct for peace and another for 
war, so there is one code for the family, the social 
circle, and the church, and a different one for mercan- 



THE ETHICS OF TRADE. 157 

tile life. The man of business is constantly passing 
from the jurisdiction of the one code to that of the 
other. Even the laws of war are improving, with the 
general growth of moral influences ; and the quasi- 
martial laws of trade are subject to similar improve- 
ment. Progress in this respect is not uniform ; there 
are periods when it is checked by the action of sharp 
competition. From such a period we are now emerg- 
ing, and a reformation of the morals of trade affords 
the chief hope of a better industrial condition. 

It is a common remark, that business practices are 
not what they should be, and that a sensitive con- 
science must be left at home when its possessor goes 
to the office or the shop. We helplessly deprecate this 
fact ; we lament the forms of business depravity that 
come to our notice, but attack them with little 
confidence. We are appalled by the great fact of 
the moral dualism in which we live, and are inclined 
to resign ourselves to the necessity of a twofold life. 
We do not realize that moral influences have for 
their particular and legitimate function to suppress 
the remnants of natural ferocity which show them- 
selves in the economic dealings of man with man ; 
neither do we realize how radical would be the effect 
of a comparatively slight reformation in this direction. 
Religion has held itself too much aloof from this 
particular work; and so effectual has been, at times, 
the separation of religious life from business life that 



158 THE ETHICS OF TEADE. 

seeming piety has, in too many cases, been consistent 
with business meanness. Such is the bitter moral 
fruit of the competitive system. 

It was the effort of mediseval times to secure, by 
public sentiment and by positive statutes, a reign of 
just prices in all commercial dealings. This precluded, 
to a great extent, the effort of rival sellers of com- 
modities to secure custom for themselves by offering 
their products for less than the established rates. Simi- 
lar causes repressed competition in the labor jnarket. 
Yet it is not true that the competitive principle was 
not then in action. In legislating to enforce just 
prices, the law-makers had a criterion for determining 
what was just. Custom, in the main, furnished this 
criterion, and this was itself determined by a certain 
latent and unconscious process of competition. If the 
rule of just prices were to be introduced at present, 
and open rivalry in buying and selling suppressed, 
there would still be need of the criterion of justice, 
and the latent competition would again have its work 
to do. The ethico-economic fact of the mediaeval 
period, and, let us hope, of the coming period, is the 
recognition of the duty of all to conform to the 
standard of justice thus established. 

From the mediaeval stage competition has developed 
through two distinct conditions. The former of these 
is that in which law of just prices still rules in trans- 
actions outside of the general market, but in which 



THE ETHICS OF THADE. 159 

the attempt to control the market itself by moral or 
statutory regulations is abandoned. Within the 
theatre of general exchanges the standard is set by 
the undisguised efforts of many persons to outdo 
each other in offering products to society as the 
general consumer. Turn the market into a general 
auction ; let sellers do their best in underbidding 
each other in price, which is overbidding in service 
rendered; note the results in the prices current, and 
then abide by them in separate individual dealings ; 
such is the mercantile code in the second stage of 
development. 

This code is imperfectly obeyed ; and, as violations 
of it become frequent, they react on the ethical rule 
itself. The third stage of competitive development is 
characterized by the gradual abandonment of the rule 
which requires that the individual should, in isolated 
transactions, conform to market standards. The new 
practice allows a man to get what he can by trade, 
under any and all circumstances. The system becomes 
as undisguisedly predatory as one can be without 
violating the rights of property in actual possession. 
The man who buys for less than the market price or 
sells for more is held to have done a creditable 
action. 

The theory of the modern bargain appears to be 
that of the mediaeval judicial combat : let each do his 
worst, and God will protect the right. As in 



160 THE ETHICS OF TRADE. 

mediseval times providence has often protected the 
wrong, and, by this means, revealed the abominations 
of the system. There is a standard which determines 
the justice or injustice of bargains ; and though the 
" higghng of the market " in which competition is 
general secures a rude conformity to that standard, 
that which takes place between a buyer and a seller 
isolated from competitors stands in no relation to 
it. Here is a chief seat of business depravity. The 
Scriptures are full of references to unjust bargaining; 
ancient law-givers attacked it; the codes of the mid- 
dle ages endeavored to suppress it, but moralists of 
recent years have sighed and resigned themselves to 
wait a geological era for moral influences to become 
strong enough to uproot the evil. It has been 
entrenched in the competitive system; with recent 
changes in that system it has become open to 
attack. If there is an intelligible law determining 
the moral quality of business dealings, it is time that 
it were universally taught and a just standard 
enforced. 

Wealth is legitimately acquired by the operation of 
production, not by that of exchange. We have already 
endeavored to draw the line where production termi- 
nates. An exchange made at rates current in an open 
market makes neither party richer ; it is mutually ad- 
vantageous and morally commendable. A bargain 
which enriches one party at the expense of the other 



THE ETHICS OF TRADE. 161 

must deviate, in its terms, from current standards. 
Money-making by exchange is virtual robbery, and is 
only prevented from being legal robbery by the imper- 
fection of the law. 

Intelligent persons do not need to be told that deal- 
ing in commodities as the merchant deals in them is an 
operation which falls, scientifically, under the head of 
production. The merchant creates form utility, place 
utility, and time utility; and his reward is as legitimate 
as that of any other producer. He has numerous op- 
portunities for ]3assing beyond his normal function, and 
acquiring wealth by exchange ; but this is always by 
unfair dealing. If he buys in gross, sells in detail, and 
gives honest goods for an honest price, he is as much a 
producer as a farmer or an artisan. 

It is the shrewd trading men who create no wealth, 
but deal in stocks, produce, real estate, horses, etc., in 
a manner that benefits no one but themselves, that 
furnish the best illustrations of money-making by the 
operation of exchange. Market prices are nothing to 
such men ; it is their aim to get more value than they 
give, both in buying and in selling. As this is not easy 
when the parties with whom they deal are aware of the 
value of the property to be transferred, it comes to pass 
that lying is a frequent part of the process. The mer- 
cantile lie is the chief modern instrument for getting 
wealth without creating it. The falsehood had better 
not be, in most cases, bald and obvious ; it Avould then 



162 THE ETHICS OF TEADE. 

be a crude instrument ill adapted to modern uses. It 
needs to be a refined product, adapted to the system 
of wliicli it is a part. 

Wliat is ordinarily termed a good bargain is, morally, 
a bad bargain. It is unequal, and good for one party 
only. Whenever such a transaction takes place, some 
one is plundered. We should term a purchase or a 
sale good only when it conforms to the standard of 
equity ; we actually call it so when it departs from that 
standard, and we gauge its goodness by the amount of 
the departure. It is the sufferer by such a transaction 
who usually regrets it; in an ideal society it would 
be the gainer who would mourn. Sackcloth and 
ashes are the proper covering of the man who has made 
a good bargain. What is the fact in the case ? Do the 
men who have gained something by this questionable 
means don the garments of humiliation ? Do they feel 
shame, or complacency ? Are they disposed to conceal 
their action, or to boast of it ? Are they, in fact, treated 
with less honor by other men, or with more? The 
whole process is bad; it is odious, and the worst fea- 
ture of it is that it is characteristically American. 

The sharp bargaining spirit which seeks to get 
wealth away from its possessors by all methods toler- 
ated by law, is characteristic of the degenerate days 
of the competitive system. Moral influence is more 
powerful and pervasive in America than in most 
countries; and if public sentiment among us renders 



THE ETHICS OF TRADE. 163 

sharp trading respectable, it is clue to the fact that 
competition has degenerated earlier here than else- 
where. 

The man who, in Germany, France, or England, 
should go from shop to shop to find whose prices were 
the lowest would be, if not turned out of doors, at 
least treated in such a manner that he would go, and 
not return. A certain survival of the mediteval code, 
the tradition of a time when the just price was the 
legal rule, has prevented the men of these countries 
from living up to the logic of the competitive system 
in its final stage. In America we are more consis- 
tent; we accept the results of a degenerate coiupe- 
tition, greatly to the detriment of our morality. 
Trade is actually held in greater honor here than else- 
where, and it deserves to be held in less ; a part of 
our respect for it is due to our peculiar blindness to 
its defects. Let us withhold our respect until it is 
due, and, that we may justly honor trade, let us make 
it honorable. 

A perfect ideal of character and conduct usually 
serves the purpose rather of a beacon than of a goal. 
Like the star toward which the sailor steers, it is a 
thing never to be reached, but only distantly ap- 
proached. Yet the pilot who depends on a star for 
direction is in peril of life if he loses sight of it ; and 
something similar to this is true of a society which 
loses from view its moral ideal. No fog ever baffled 



164 THE ETHICS OF TRADE. 

a sailor more completely than the dual code of moral- 
ity, the outgrowth of a degenerate mercantile system, 
has blinded and baffled the people of this country. 
The true standard of business dealing has been hid ; 
it needs to be brought to the light and placed where 
all may see it. Though it were never reached, it 
would make all the difference between success and 
failure, if our course could be turned toward it instead 
of from it. 

The changes now in progress make it possible to do 
more than to gaze at the moral ideal of trade from a 
hopeless distance, or even to somewhat lessen the 
gulf that separates us from it. Moral force is to 
work, hereafter, from a new vantage-ground. There 
is, moreover, among the multitude of those whose 
occupations are wholly legitimate, and whose con- 
sciences are not blinded by the false mercantile code 
that has begun to prevail among us, a moral energy 
amply adequate to accomplish the reformation of our 
business system, could the true principles of practical 
ethics be generally taught and accepted. 

One form of business immorality is very radical in 
its effects, and the removal of it would be more than 
a palliative for existing social evils ; it would be, to a 
great extent, curative. The evil is the most savage 
form of competitive action tolerated by law. Much 
of our bargaining is a refinement of fraud ; this is a 
refinement of highway robbery. It is a survival of 



THE ETHICS OF TRADE. 165 

troglodyte econoni}-, though its methods are adapted 
to the civilized state. The aim of the practice is to 
get property by force from weak possessors. The 
weapon used is not the club of the cave-dweller; it 
is unnecessary to kill the victim ; it is only necessary 
to j)resent to him an alternative so hard as to compel 
him to relinquish his possessions. The matching of 
strength against weakness is contrary to fighting codes ; 
equal armor and equal weapons were the rule of 
knighthood. The mercantile code permits any amount 
of inequality of outfit. We need a revival of the old 
German sense of honor ; and especially and particu- 
larly do we need a little of that chivalrous spirit 
which protected women and children in mediaeval 
times. It is one of the enigmas of modern life that 
the literal striking of a woman, however lightly, should 
brand the offender as a social outcast, while, in an 
economic way, the deadliest blows may be struck at 
her with impunity ; and that society even honors men 
who get rich by such unknightly attacks on the de- 
fenceless. The modern sense of personal honor is, 
like the modern standard of morality, dualistic. 

Special exigencies often render particular persons 
unable to bargain on equal terms with those with 
whom they are dealing. They may be compelled to 
sell something immediately, and the urgency of the 
case may allow no time to seek more than one pur- 
chaser. They are, for the time being, excluded from 



166 THE ETHICS OF TRADE. 

any general market. In this case, as in most cases, 
freedom unqualijfied by law is not freedom, but li- 
cense. The commercial code which authorizes a trader 
to depart from the standards furnished by the gen- 
eral market gives him, as it were, letters of marque, 
authorizing him to prey upon the weak at will. 

A borrower, in special exigencies, is often at the 
mercy of a single lender. A merchant who is in any 
danger of failing in business is often compelled to 
accept the offer of a single customer. A land-owner 
who cannot pay his mortgages is often compelled to 
accept what a single purchaser may choose to offer; 
and men are numerous enough whose business it is 
to create and to utilize such exigencies. The actual 
creation of the exigencies is most frequently the busi- 
ness of the operator in the stock exchange or the pro- 
duce exchange ; but the utilizing of them is common 
enough everywhere. It is the baldest of robbery, and 
is all the worse because the law cannot reach it effec- 
tively. The result of recent movements is to lessen 
the field for it, and, with public sentiment acting in 
the right direction, we may hope for the correction 
of the evil. 

In other than financial exigencies the true princi- 
ple is clearly enough recognized. A boatman does 
not stop to make terms with a man in the water be- 
fore taking him on board. A ship's captain does not 
settle the question of salvage before taking the crew 



THE ETHICS OF TRADE. 167 

from a wreck. They render the service without ques- 
tion, and collect the equitable reward afterwards. 
Society demands the prompt rendering of the service ; 
the refusal to render it is a crime, and the making of 
conditions is a temporary refusal. The boatman who 
bargains with a sinking man, virtually says to him, " I 
now refuse to rescue you, but will change my mind if 
you will give me a certain sum. My refusal to rescue 
you is equivalent to drowning you, and I shall drown 
you unless you give me some something to which I 
have no equitable claim." It is the position of the 
highwayman ; and the same is true of those who utilize 
financial exigencies in the same way. Financial 
drowning brings ruin to families, and is sometimes as 
much worse, in its effects, than literal drowning, as 
the slow starvation of many persons, or their intellec- 
tual and moral ruin, is worse than the quick deatli 
of one person. The moral and legal principle is the 
same in both cases, and should be equally recognized 
and obeyed. 

It is too much to expect that persons whose nature 
prompts them to a predatory commercial life will change 
their practices while the field continues open for them. 
The hope for a radical change in this department 
of business ethics lies partly in the fact that the 
field is no longer clear for the worst practices which 
the competitive system has developed. Where a 
mercantile freebooter gains an advantage by the 



168 THE ETHICS OF TliADE. 

methods above described, his rivals feel compelled 
to adopt them, against the protest of their moral 
nature, and competition tends to level the mercantile 
community downward to the moral standard which 
proves most profitable. It is a very ordinary honesty 
which is the best j^olicy, in a time of unscrupulous 
competition. 

The chief bearing of these principles is upon the 
labor questions of the day. Workmen have hereto- 
fore been the most frequent victims of predatory 
competition. Large numbers of tliem have been practi- 
cally confined to one employer, as a customer for that 
which they have had to sell. Their exigency has often 
been extreme, and their relations to each other such 
that, when cases of extreme need have occurred, the 
effect has been diffused over the entire number. 
Not only the few whose necessities have compelled 
them to accept whatever was offered, but the entire 
class which they represent, have been liable, at such 
times, to have their wages lowered. It is, as a rule, 
by means of a few exceptional cases that the extreme 
results of unbalanced competition are suffered by the 
laboring class ; and it takes place by a process of 
rotation, in which, at every step, advantage is taken 
by some one of isolated cases of distress. 

A few persons are at first crowded out of employ- 
ment ; a brief period suffices to reduce these to a 
condition where they must accept anything which 



THE ETHICS OF TRADE. 169 

may be offered for their labor. If some one who is 
on the watch for such opportunities now offers them 
half the prevailing rate, and they accept it, the effect 
may be to displace others, and to reduce them also, 
by the hunger argument, to a willingness to accept a 
similar reduction. The process may be repeated 
indefinitely, until, in the end, general wages are 
correspondingly reduced. The many benevolent em- 
ployers who engage in the procedure with reluctance 
are driven to it by the competition of others. A few 
men without employment, and a few employers with- 
out souls, are the conditions of a general reduction 
of wages below the point to which more legitimate 
causes would reduce them. Unemployed men and 
soulless employers always exist somewhere. It was 
stated, in the interest of railroad managers, at the 
time of the general strike of 1877, that the places 
of the strikers could all have been filled, at the 
reduced rate which was then offered ; and it was on 
this supposition that much denunciation was expended 
on the leaders of the movement. On general prin- 
ciples the statement is very improbable. The vacan- 
cies could have been filled, had they occurred a few 
at a time, by the process of rotation above described ; 
but, after the changes had taken place, it would have 
been, to a great extent, the same men who would 
have been found in the positions. A few at a time 



170 THE ETHICS OF TRADE. 

they would have left their employment, suffered for 
a while, and returned to their work. 

This rapid rotation, whereby large classes are 
reduced to a rate of wages lower than that at 
which they can permanently live, lower than any to 
which legitimate causes would need to reduce them, 
is the only means whereby, in a country like ours, 
the extreme results of Ricardo's principle can be 
realized. It has never, in our actual experience, 
been realized. We have seen wave after wave of 
competition, sharper than that which exists in other 
countries, sweep over the industrial classes, begin- 
ning with retail dealers, and extending itself to 
wholesale dealers and manufacturers, until it has 
reached the laboring class, and spent its accumulated 
strength upon them. Yet wages have rebounded, 
after each depression, to a level above that which 
is maintained in conservative countries. The cause 
is obvious, — our vacant lands. Competition cannot 
starve men while free farms are waiting for them. 
Yet thoughtful men must have realized that the reward 
of labor in this country has not been as much above 
that which has elsewhere prevailed as our resources 
would have warranted. Something must, in a meas- 
ure, have neutralized our advantages; and, while 
causes like an excessive tariff will occur to every 
one, a part of the effect must be attributed to the 
sharply competitive spirit of our people. Labor- 



THE ETHICS OF TRADE. 171 

unions have been late in developing, and unbalanced 
competition, under a low code of commercial ethics, 
has produced its natural effects. 

Free homesteads of good quality are no longer to 
be had ; and this fact radically changes the industrial 
situation. It lessens the product to be divided be- 
tween employers and workmen, and it modifies the 
terms of the division. We must depend on new 
influences, in both directions, in the era which is 
coming. If the product of industry is materially 
lessened, no readjustment of the terms of division 
between labor and capital can make good the work- 
man's loss. The influence tending to make industry 
productive we shall later examine ; that which favor- 
ably affects the terms of distribution is not merely 
the consolidation of labor, but that movement followed 
by the moral development for which it opens the way. 
The solidarity of labor calls imperatively for arbitration, 
in the adjustment of its claims, and accustoms the public 
mind to accept a standard of wages determined by jus- 
tice rather than force. Within broad limits it puts a 
definite stop to the predatory methods which com- 
petition has developed. Soulless employers can no 
longer use a few unemployed men as a lever with 
which to reduce the wages of an entire class. The 
process of rotation, by which this has been possible, 
is precluded by the establishment of strong trades- 
unions. The pecuniary effect of this change is of im- 



172 THE ETHICS OF TRADE. 

portance to laborers ; the moral reaction which it 
occasions is of incalculable value to employers. Their 
better impulses may now assert themselves. The 
emploj^er who has long been willing to pay fair 
wages, but has been unable to do so because of his 
neighbor's competition, is relieved from his dilemma. 
The necessity which compelled him to stifle his con- 
science is changed to a coercion forcing him to obey 
it ; and while right conduct under compulsion may 
not redeem him in the eyes of the moralist, it removes 
a blight from his business life, and makes a truly moral 
development possible. To society as a whole the 
changes incident to the altered relations of employers 
and workmen involve a change of organic character. 
The present interval is morally transitional. The 
relaxing of healthy restraints, the growth of mercan- 
tile license, has characterized the period now closing. 
Trade has become openly predatory, and the weak 
have been the victims. The field for such practices 
has been partly closed, but the code which jus- 
tified them has not been abandoned. We are in dan- 
ger of importing into the new era the ethics of the 
old. It would be the anomaly of old wine in new 
bottles, the spirit of a decayed system surviving after 
its forms had been renewed. With the growth of new 
processes of distribution, with arbitration and the 
various forms of industrial partnership, a better ethical 
code must assert itself. Justice in the division of 



THE ETHICS OF TRADE. 173 

products, equality in exchanges, must become the aim 
of social effort. The gain will be both material and 
moral; the change which makes workmen richer will 
make all classes better ; and what is of more impor- 
tance, it will open the way for continued progress. 
Wages may sometimes be low, but not because of 
an eternal downward tendency; and the death-line 
as a natural limit will forever disappear. The 
law which condemned society, as an organic whole, 
to a career of brutality will be changed to a law 
which will open before it a continuous growth in 
righteousness. 

Note. — The foregoing theory of business ethics does not condemn 
speculation as such. To buy articles when they are cheap with a 
view to selling them when they are dearer, is to acquire wealth by 
accretions of time utility, as indicated in Chapter II. The theory 
condemns the manipulating of temporary prices by virtual force or 
fraud; but the form of immorality to which it refers as characteristic 
of a degenerate system is that which appears in the dealings of one 
individual with another, and which consists in using refinements of 
force or fraud in such a manner as to effect unequal exchanges. The 
standard of equity in the purchase and sale of commodities is deter- 
mined by the normal action of demand and supply in an open market. 



CHAPTER X. 

THE PRINCIPLE OF COOPERATION. 

Tn History has lately been said to move in cycles and 
epicycles ; its phenomena tend to recur at intervals, in 
regular succession. An anarchic condition may be fol- 
lowed by despotism, that by democracy, and that again 
by anarchy; yet the second anarchy is not like the first; 
and when it, in turn, yields to despotism, that also is 
different from the former despotism. The course of 
history has been in a circle, but it is a circle whose 
centre is moving. The same phenomena may recur 
indefinitely; but at each recurrence the whole course of 
events will have advanced, and the existing condition 
will have its parallel, though not its precise duplicate, 
in some previous condition. There is nothing perma- 
nent in history, and there is nothing new. That which 
is will pass away, and that which will take its place will 
be like something that has already existed and passed 
away. History moves, like the earth, in an orbit ; but, 
like the earth, it moves in an orbit the centre of which 
is describing a greater orbit. \ 

That any particular condition has existed in the past, 
and has passed away, is no evidence that it will not 
return, but is rather an evidence that it will return, 



THE PKINCIPLE OF COOPERATION. 175 

thougli in a different form. That village-communities 
■working on a cooperative plan existed in the Middle 
Ages, and that something resembling them existed in 
antiquity, is, as far as it goes, an evidence that industrial 
cooperation will return, though in a form adapted to its 
new surroundings. That a fraternal spirit prevailed 
where this plan was in operation, and that justice rather 
than force presided over the distribution of wealth, 
affords some evidence that this moral force will do a 
similar work in the modern workh^^ Productive property 
owned in undivided shares by laboring men, contention 
over the division of products replaced by general frater- 
nity, — this is the ideal which humanity has repeatedly 
approached, abandoned, and approached again, y 
•^/ The earlier cycles of the historic movement are too 
remote for tracing; the records of the last one are 
reasonably distinct. We have been made familiar, of 
late, with the village-community of mediaeval times. 
Beginning at that point, we may trace the economic 
history of Europe through a series of conditions bearing 
less and less resemblance to the communal ideal, until 
we reach the aphelion of the system, the point of ex- 
treme individualism, and begin slowly to tend in an 
opposite direction. ' This turning-point maybe located 
at a period about a hundred years ago. While Adam 
Smith was formulating the present system ,of political 
economy, the world was, in industrial relations, at the 
extreme limit of individualistic development. The 



176 THE PRINCIPLE OF COOPERATION^ 

manufacturers of the period were a myriad of capitalist- 
artisans, each working in his little shop. The common 
carriers were an army of wagoners. The hired workmen 
were without union ; and every-man-for-himself was the 
rule among them, as among their employers. 
"'' The feature of the next period, which still continues, 
is a practical movement tending, not to abolish or to 
weaken the institution of private property, but to vest 
the ownership of capital in organizations rather than in 
individuals. These organizations may be private corpo- 
rations, village-communities, cities, or even states ; and 
if laboring men are represented in them, there is seen, 
in practical working, a form of cooperation. 

The word thus signifies a more highly developed 
social organization. Within the great organism which 
we term the state there are many specific organisms of 
an industrial character; Such are nearly all our manu- 
factories. These have the marks of high development 
in a minute differentiation of parts ; labor is minutely 
subdivided in these establishments. One man grinds in 
the axe-factory, and, during his brief lifetime, is not, in 
economic relations, an independent being, but only a 
part of the grinding organ of an axe-making creature 
whose separate atoms are men. All the laborers of the 
factory, taken collectively, compose an organism which 
acts as a unit in the making of axes. This working 
body, however, with its human molecules, is acting in a 
subordinate capacity ; — it is hired. As a whole it is 



THE PRLNCIPLE OF COOPERATION. 177 

serving an employer, and it desires to become indepen- 
dent. The same ambition which prompts the apprentice 
to leave his master, and start in business for himself, is 
now prompting these organizations of employes to desire 
a similar promotion. Industrial organisms are seeking 
what individuals have long been encouraged to seek, — 
emancipation. It is the old struggle for personal inde- 
pendence, translated to a higher plane of organic life. 

The modes in which this end is sought are various ; 
and, in so far as the object is realized by any of them, 
competition is held in abeyance within the organiza- 
tions, and the division of the product is determined by 
justice rather than force. 

Justice is by no means excluded under the present 
system. What we term competition is, in practice, 
subject to such moral limitations that it can be so 
termed onl}^ in a qualified sense. Moral force, however, 
within the competitive system, acts only as a restrain- 
ing influence ; it fixes certain limits within which the 
self-seeking impulses are encouraged to operate, and 
determine by a struggle the division of the fruits of 
industry. 

^The adjustment of wages by arbitration is a depart- 
ure from this principle, and, wherever adopted, remands 
competition to a subordinate place. The general prev- 
alence of it would mean a reign of law rather than of 
force, and would mark an era in the moral evolution of 
society. The era would, however, be one of quasi- 



178 THE - PRINCIPLE OF COOPER ATIOIST. 

litigation. To be successful, the plan of arbitration 
requires many tribunals in ceaseless activity. It checks 
lockouts and strikes, and allays the antagonism excited 
by these overt conflicts. The speedy establishment of 
the tribunals is, therefore, the present desideratum. 
Yet the arbitrative system is not an ideal one. Its 
fundamental defect lies in the fact that it concentrates 
the attention of employers and of workmen on the 
terms of the division of their joint product. An issue 
of this kind, even though amicably adjusted, tends, in 
itself, in the direction of antagonism. It fails, more- 
over, to secure the largest product for division. 

Cooperation works in an opposite way in both re- 
spects. It concentrates the thought and energy of all 
on production, the process in which the interests of 
different classes are identical ; and it develops harmony 
of feeling, while securing a large product for distribu- 
tion. It avoids the constant readjustment of the terms 
of division, which is the characteristic of the arbitra- 
tive system, and takes the workman permanently out 
of the position in which his gain is his employer's loss. 
It makes fraternity possible among men. 

Wage workers are now striving, by the crude means 
at present available, for more favorable terms of distri- 
bution. The amount which it is physically possible for 
them to gain by this means is quite limited. How 
much would their wages be increased if they could se- 
cure all that now goes to employers ? Induce capital- 



THE PRINCIPLE OF COOPERATION. 179 

ists to loan their money and give their best skill and 
energy in management for nothing, and how much 
would thereby be added to the general sum of wages ? 
The data are not at hand for an exact answer ; but a 
calculation lately made on the basis of the figures of 
the last census would seem to indicate that profits and 
interest amount to about one half as much as wages, 
and that a distribution that should leave to the em- 
ployer nothing, would, at the most, increase wages but 
fifty per cent. 

Now it is obvious that no class of men will or can 
furnish capital and expend skill and energy for nothing. 
It is safe to assert that the average employer would close 
his business were his own returns reduced to one half 
of their present rate. An increase of one quarter in total 
wages would, then, seem to be the utmost that is to be 
hoped for under present conditions. Now if the strikes 
that aim to bring about this re-adjustment lessen produc- 
tion, they farther reduce the available margin on which 
the workmen are trying to draw. If an increase of 
twenty-five cents on the dollar is all that can be hoped 
for while the productiveness of industry is unchanged, 
a very limited increase is all that can be had if indus- 
tries are deranged and their productiveness lessened. 
It must be by better means than strikes that any con- 
siderable gain is ever to be realized by workmen. 

Cooperation aims to increase the margin from which 
the increment of gain is to be drawn. It makes in- 



180 THE PRINCIPLE OF COOPERATION. 

dustry more productive ; it gives to the employer some- 
what more, and to the laborer much more than they 
now receive. Its moral advantage over the present sys- 
tem is greater than its material one, since it settles 
questions of division in a manner so obviously just as 
to hold all conflicting claims in abeyance. It destroys 
the material out of which contests are made. 

The key to the question as to what system ought to 
emerge from the present chaotic condition of industry is 
found in the fact that employers and workmen sustain to 
each other two distinct relations, of which one is antago- 
nistic and the other harmonious. In merely dividing the 
product of industry their interests conflict ; in creating 
it they are in perfect harmony. Competition and even 
arbitration bring into prominence the relation which 
develops conflict ; cooperation brings into sole view the 
relation tending to unity. 

We used constantly to be told, and still frequentlj^ 
hear, that no intelligent conflict between capitalists and 
laborers is possible ; that their interests are completely 
identical, and that their normal relation is one of para- 
disaical harmony. Frequently as this statement was 
formerly reiterated, the laborers were not convinced ; 
and, in the meanwhile, the practical relation between 
them and their employers grew constantly less para- 
disaical. There is, in prevalent discussions, a confusion 
of thought which an analysis of actual relations ought 
easily to remove. 



THE PRINCIPLE OF COOPERATION. 181 

We have s.aid that there is harmony of interest be- 
tween the two industrial classes in the operation of 
production, and diversity of interest in the operation 
of distribution. Under a wage system the effect of 
this twofold relation is to create a conflict, and at the 
same time to set limits to the overt acts to which the 
conflict might lead. So long as this system continues, 
the utmost that is to be hoped from education is that 
the limitations may be applied wisely. Capitalists and 
laborers are interested that as much wealth as possible 
sliall be produced, for both are dependent on the product. 
The mill must be run, or neither owner nor employ^ 
can receive anything. When, however, the product is 
realized, the relation changes ; the question is now one 
of mere division. The more there is for the owner, the 
less can go to the men ; and no education can remove 
this source of conflict. 

The crew of a whaling ship are paid, as we shall later 
notice, by shares of the cargo ; and if the proportion to 
be received by each man were not settled in advance 
by contract, they would naturally work with good will 
until the cargo should be brought into port, and then 
develop a hopeless wrangle over the division of it. 
They would not, however, go to the length of burning 
the ship, since all would need it for future use; but 
would they delay the refitting of it? Would they at- 
tempt to enlarge their returns, at the cost of the owner, 
to an extent that would prevent him from building 



182 THE PEINCIPLB OF COOPERATION. 

more ships? Here is the field in which intelligence 
may do its work. Ignorance and passion make the 
limits of overt action broad, and tolerate much that 
discourages production, and even lessens the store of 
wealth accumulated. Intelligence narrows the field of 
strife, suppresses all violence, and confines within a 
minimum range all measures which reduce the product 
of industry ; but within the limits as ultimately set, it 
allows the conflict to continue. 

For clearness of illustration a case has been selected 
in which production and distribution are separated in 
time ; whalers first secure the oil, and then divide it. 
In most industries the two processes go on together ; 
wealth is divided day by day, and week by week, as it 
is produced, and the relation of employers and employed 
is, therefore, not an alternation in time, from a condi- 
tion in which their relations harmonize to one in which 
they antagonize, but presents a permanent harmony in 
one respect, and a permanent antagonism in another. 
J Both parties are interested in continued and successful 
I production ; but in the mere matter of distribution 
( their antagonism is as permanent as their connection. 
I To ignore either side of the relation is unintelligent. 
If it be incendiary to proclaim an irrepressible conflict 
between capital and labor, it is imbecile to reiterate 
that there is no possible ground of conflict between 
them, and that the contests which actually occur, are 
the fruit of ignorance. 



THE PiilNCIPLE OF COOPERATION. 183 

While there is no such thing as changing the mode 
of dividing a common possession in such a manner as to 
give one partner more without giving the otlier less, 
there is such a tiling as making the plan of division so 
obviously just, as to settle once for all the question of 
proportionate shares, and to concentrate the energies of 
all on the securing of a large product. Put the parties 
who create wealth on such a footing that neither can 
claim more than he gets, without violating an obvious 
principle of equity, and they will make the division un- 
thinkingly, and plan and work only for benefits which 
accrue alike to all. 

^ Such is the aim of cooperation. It is the principle 
of solidarity in a new field. The great consolidations 
now in process are for belligerent ends ; this is for an 
amicable end. The organization of capital, on the one 
hand, and that of labor, on the other, enable these 
agents to fight a good battle over the division of prod- 
ucts ; cooperation allays strife, and enables them to 
expend their whole energy in creating products. Re- 
curring again to the diagram which illustrates the proc- 
ess of distribution, we find that present consolidations 
are taking place between the horizontal lines, while 
cooperation always crosses a line, and merges two 
classes which are now in a hostile attitude. 

This blending of classes is tlie feature even of that 
partial cooperation, known as profit-sharing. The work- 
man does not, by this plan, own capital and receive in- 



184 THE PEINCIPLE OF COOPERATION. 

terest ; but he uses it, and receives a share of net profits. 
He is not a capitalist, but he is an entrepreneur^ or em- 
ployer ; and the benefit derived from the system, con- 
sists in the fact that he performs his part of the direc- 
tive function exceedingly well. All the workmen with 
their employers constitute, collectively, an exceptionally 
good entrepreneur. 

Mr. Mill's illustrations of this system, taken from the 
workshops of Paris, are familiar, as are the instances 
of the Paris and Orleans railroad, and the Whitwood 
collieries described by Mr. Sedley Taylor. The Labor 
Report of Massachusetts for 1886 shows that profit- 
sharing has, for some time, had a foothold in this State. 
The introduction of the system into new fields has, of 
late, been of almost daily occurrence. The success 
already attained places this mode of industry beyond 
the limit of schemes which can claim only a theoretical 
support. It is, indeed, essentially right, and ought to 
succeed ; but it also has succeeded. 

An illustration of profit-sharing which is near at 
hand and brilliantly successful is afforded by the whale 
fishery of New England. This industry places in a 
conspicuous light the basis of the success of the system, 
namely, the increase in production which attends it. 

The difference between the product of interested 
labor and that of labor which is careless and lazy is 
always noticeable ; but in the whale fishery it is excep- 
tionally great. An eager search, a zealous pursuit and 



THE PPtlNCirLE OF COOPERATION. 185 

a resolute attack are secured only by the stimulus of a 
personal interest in the result. Superintendence by 
owners is impossible, unless the captain be a proprie- 
tor; and if he is so, the plan becomes, to that extent, 
cooperative. Even though the captain were the sole 
owner, his best efforts would not ensure a profitable 
voyage, unless a heartier obedience could be secured 
than is usually seen on ships. Moreover payment by 
the day might interest the crew in unduly prolonging 
the voyage. Profit-sharing has, therefore, driven the 
wage system from this industry. A summary of results 
attained by this method in other fields shoAvs that the 
same basis of success exists elsewhere, though not 
often in the same degree. Profit-sharing, as a rule, 
secures interested and successful efforts, increases the 
product to be divided, and while giving to the capitalist 
somewhat more, gives to the laborer much more than 
can be had under the present plan of eternal belliger- 
ency. 

It is an advantage of the system of profit-sharing that 
it may be gradually developed. It may differ at first 
from the wage system by a small gradation, which may 
be increased by successive changes. The prevailing- 
rate of wages may be paid, and a small proportion of 
the net profits may be added, as a bonus, in the case of 
a few workmen in responsible positions. The amount 
distributed and the number of the recipients may be 
gradually increased, until the amount received from 



186 THE PRINCIPLE OF COOPERATION. 

this source constitutes a main dependence of every 
workman. Then only is the laborer so far merged in 
the employer as to secure the maximum benefit from 
the relation. 

Profit-sharing, when fully developed, requires that a 
provision be made for unprofitable years by a reserve 
fund, from which, when profits for the time disappear, 
the stipend necessary for the laborer's maintenance may 
be drawn. 

It is to be noted as theoretically possible that, in 
industries conducted on the share principle, disputes 
may arise concerning the size of the shares. The sea- 
men on a whaling-ship who receive each a two-hundredth 
part of the cargo may strike for the one-hundred-and- 
fiftieth. Strikes of this kind do not, in fact, occur, , 
doubtless because the workmen realize the more ade- 
quate justice which is done to them by the share system, 
and are unwilling to disturb its successful operation. 

The increased willingness of employers to adopt this 
system, in some of its gradations, is a noteworthy fact of 
the present period. Four systems of industrial organi- 
zation are now on trial, with a prospect that the fittest 
will, in the end, survive. If the competitive system in 
its degenerate state leads to strikes and lockouts, arbi- 
tration will survive as between these two. If arbitration 
concentrates the attention too much on the mere divi- 
sion of the product, profit-sharing may outlive it. If 
profit-sharing still leaves as subject for dispute the pro- 



THE PRINCIPLE OF COOPERATION. 187 

portion of profits to be given to labor, full cooperation 
may, in many fields, be the ultimate survivor. 

A better mode of industrial organization replaces a 
worse, as a better mechanical process replaces an infe- 
rior one, by enabling those who use it to undersell their 
competitors. The immediate effect of the adoption of 
profit-sharing by a few establishments is to increase the 
reward of the laborers employed in them. This, of 
itself, is a powerful incentive to other workmen in the 
same occupation to strive to secure a like increase. If 
this leads to strikes, it gives to the profit-sharing estab- 
lishment a relative advantage, in addition to that which 
is inherent in the plan itself. An employer whose 
working force may always be depended on may under- 
sell one whose men are watching for opportunities to 
increase their wages by a strike. Under present condi- 
tions profit-sharing must, in order to survive in the 
struggle of systems, prove superior, not to competition 
working smoothly and successfully, but to competition 
essentially vitiated and subject to incessant friction. It 
is safe to assert that the plan of profit-sharing is inher- 
ently capable of doing this. In some fields it has proved 
superior to competition at its best ; it will easily excel, 
in many more fields, the wreck of the old system with 
which it is now brought into comparison. 

If a corporation were to adopt the shar& system in 
dealing with its employes, and were to pay the amount 
given to them, in excess of daily wages, in the form of 



188 THE PRINCIPLE OF COOPERATION. 

stock, the effect would be to gradually transmute the 
partial cooperation into the complete form. New estab- 
lishments started on this plan have, as a rule, perished 
in their infancy. Experience has shown that the mor- 
tality among them is increased by loans of capital made 
to them either by governments or by philanthropic 
societies. Such loans strain the enterprises at their 
weakest point, namely, their general management. 
Profit-sharing retains the experienced employer as the 
general director, and enlists the interest of every work- 
man in the oversight of details within his province. 
Full cooperation, unless established by the gradual 
method above spoken of, renders a managing committee 
necessary, and the inexperience of the men selected for 
this function imperils the enterprise. A loan increases 
this danger, by increasing the scale of operations under- 
taken, and by causing the enterprise to start under a 
burden of debt. Great as are the disadvantages of 
small production, a cooperative experiment has the best 
chance of success when it submits to them, and acquires 
the needed experience as it enlarges its operations. 

The survival of full cooperation, in the long rivalry 
of systems, depends on its power to excel other systems 
in the results which it ultimately yields. Failures at 
the outset may deter experiments in this direction, and 
make the introduction of this method proceed slowly ; 
but they do not change the law of survival. That is a 
question, not of initial risks, but of results gained by 



THE nilKCirLE OF COOPERxVTlOX. 189 

the successful experiment. If one cotton mill run on 
the cooperative plan shall ever surpass other mills in 
economy of production, to an extent that will enable it 
to undersell their product in the market, it may ulti- 
mately compel them to adopt this method, though a 
score of earlier experiments have failed. 
>^The new political economy must recognize, as one of 
its principles, this special and higher competition by 
whicli systems are tested. Individual competition, the 
basis of the traditional science, is, in extensive fields, a 
thing of the past. It has been vitiated by combinations, 
leaving society without its former regulative principle. 
Yet is is only temporarily that wages are to be adjusted 
by a crude struggle of labor unions with employers' 
associations ; the permanent mode of adjustment must 
be by some application of moral force. Arbitration, 
profit-sharing and full cooperation depart radically from 
the old competitive method, and appeal, each in its 
own way, to principles of equity, in dividing the pro- 
ceeds of industry. Yet among the systems as such 
competition should rule, in determining which is fittest 
for ultimate survival. Cooperation will, by this process, 
have a fair chance in the industrial world. If, in the 
comparison with other systems, it is shown that it ought 
to survive, it will do so, and that regardless of initial 
failures. 

The chaotic condition of industrial society opens 
wider than it was ever opened before the door for new 



190 THE PRINCIPLE OF COOPERATION. 

forms of organization. As the easiest of adoption, the 
plan of adjusting wages by arbitration bids fair to make 
the most rapid headway. When thus renovated, the 
wage system will bear a far better comparison with the 
two cooperative methods, and will have, by so much, a 
better chance of surviving. In some large fields it may 
continue indefinitely. The comparison between it and 
the cooperative systems has yet to be made by the tests 
of the market. A practical comparison of the relative 
merits of profit-sharing and full cooperation, is still far- 
ther in the future. On general principles that system 
should come earliest which best adapts itself to an im- 
perfect condition of society; and those forms should 
come later which are the expression of a higher develop- 
ment. On these grounds, which are not wholly specu- 
lative, the two systems which are based on the fraternal 
principle of partnership, may be expected to survive 
those which are based on a principle of strife. 

There are certain establishments nominally coopera- 
tive which have little significance, as bearing on the 
labor question. The chief of these is the Rochdale 
form of the cooperative store. Workmen variously 
employed contribute capital, hire men of their own class 
as managers, sell goods for cash at market prices, pay a 
fixed percentage per annum to the share-holders, and 
divide the remaining profits among the customers, on a 
pro rata plan, according to the amount of their pur- 
chases. The essential principle of true cooperation is 



THE PRINCIPLE OF COOPEliATION. 191 

its obliteration of dividing lines in industrial society. 
Workmen become, by means of it, employers of their 
own labor, and distribution, the cause of strife, is con- 
ducted on a new plan. To this result the Rochdale en- 
terprise contributes nothing. The men who own the 
store remain, as wage workers, in the mills; and the 
division of the product of their own industry proceeds 
according to the old plan, and with the same liability 
to conflict as if the store had never existed. Yet, 
by a strange perversity of nomenclature, this process 
has been termed " cooperative distribution," apparently 
because the store distributes useful articles among the 
members of the community who patronize it. The in- 
dustry conducted in it is the ordinary mercantile one 
of buying in bulk and selling in detail ; and it creates 
the various utilities which we have analyzed as the re- 
sult of the merchant's function. It is productive in as 
complete a sense of the term as the spinning of wool or 
the raising of sheep. To term the process "distribu- 
tion " is to increase the difficulty which besets the stu- 
dent of grasping the essential nature of the distributive 
process. This is a division of the abstract value created 
by industry, not a carrying of parcels to and fro in 
express wagons. 

"Whatever the Rochdale process is, it is not distribu- 
tive, since it leaves the men who own it still working 
for wages under their old employers. In the case even 
of the managers and clerks in the store itself the wage 



192 THE PRINCIPLE OF COOPERATION. 

system survives ; these men are paid for their ser- 
vices like the clerks of any merchant. The process 
is complex, and, in reality, is only quasi-cooperative. 
It may, perhaps, be termed mixed cooperation, since 
the essential peculiarity of it is that men who are em- 
ployes in one industry become proprietors in another. 
There is a union of capital and labor in the same hands, 
but not in the same industry. The store is of value to 
the customers which it serves, since it offers to them a 
virtual reduction of prices, and at the same time pre- 
sents the savings thus effected in periodical dividends, 
which the receivers are encouraged to invest as capital 
in the enterprise. It has an invaluable educating effect 
upon the men who maintain it. It also reacts favorably 
upon the character of the mercantile class, since it im- 
pels all who would hold their own in competition with 
it to sell honest goods at fair prices. It is a valuable 
social institution ; but it leaves the labor problem where 
it found it. 

There has existed, in the case of the English coopera- 
tive stores, elements of success which are not to be 
found in this country. There was, at the outset, a lack 
of retail shops that were either good or cheap. There 
was an abnormal extension of the credit system among 
dealers ; and there was an absence among them of that 
sharply competitive spirit which leads merchants to 
strive to outdo each other in reducing prices to a mini- 
mum. There was a large homogeneous population of 



THE PRINCIPLE OF COOPERATION. 193 

manufacturing employes, well organized, and specially 
imbued with the teachings of Robert Owen. The asso- 
ciation, therefore, had exceptional material in its mem- 
bers, and an unusual field for securing custom by the 
virtual reduction of prices which it was able to offer. 
That similar experiments have been less successful in 
this country is, in part, due to the fact that they are 
less needed. The absence of the conditions of success 
signifies the presence of conditions in which the work 
of the store may be done by other agencies, and in 
which more important fields are offering for coopera- 
tive enterprise. 

Competition is here sharper, and retail shops are bet- 
ter than in England ; it is, therefore, less easy for a store 
established on the new plan to attract customers. If, 
in any locality, this is not true, it is an evidence that, 
in this one respect, the local conditions make a coopera- 
tive store both desirable and practicable ; and if the 
other conditions are favorable, such an enterprise should 
be started. If inertness on the part of workmen re- 
tards it, there is a field for moral influence to do its 
work. 

Complete cooperation has succeeded on the largest 
scale in agriculture. The economic motive for this 
mode of living is less urgent in this department of in- 
dustry than in others. Agriculture is not yet central- 
ized, as are manufactures, and the relations of the 
classes engaged in it are not strained to a dangerous 



194 THE riilNCIPLB OF COOPERATION. 

extent. Yet success in cooperative farming is compara- 
tively easy; and wherever a special motive impels men 
to this mode of living, a community may be founded 
and made to thrive. Such an extra-economic motive 
may be afforded by religion. The Shakers, the Amana 
Communists, the Perfectionists and others have been 
united by bonds other than those of pecuniary interest. 
Such communities are exceptional, and, like the co- 
operative stores, contribute little toward the solution 
of the labor question. Their success is valuable, not 
mainly as a proof that agricultural communism is, in a 
local way, possible, but as an evidence that this mode 
of living is favorable, as it appears to have been at 
Jerusalem of old, to religious brotherhood among men. 
The early Christian commune was a success spiritually, 
if not otherwise ; and if a village on the communal plan 
can, here and there, be made to thrive economically and 
religiously, it may contribute its little share toward 
promoting the growth of fraternal feeling among those 
who look upon it from the outer world. As in the case 
of the Rochdale enterprise, its chief service to society is 
educational. 

A motive of a directly opposite kind may induce a 
large city to adopt measures tending in a communistic 
direction. The city may make a complete surrender 
to its mercantile environment. It may conclude that 
it has more in common with the business corporation 
than with the state as a political entity, and that it can 



THE PKINCIPLE OF COOPERATION. 196 

best promote the comfort of its inhabitants by owning 
gas and water works and street railways, and endeav- 
oring to manage them in the interest of all. If it suc- 
ceeds in such a course the fact is due to the strictly 
local patronage of (le business enterprises undertaken. 
The city does not, hereby, cater to the general outside 
public, and it therefore comes into no competition 
with private producers, whose better management would 
bring their municipal rival to failure. Such public 
mterpriv ^s are, in a sense, cooperative, since all who 
jay taxes '.re share-holders in them ; but they throw no 
light on the relations of capital and labor. Their work 
lies in the department of municij)al finance. 

Prison industry conducted on "public account" is a 
useful form of cooperation. The socialistic ideal is 
realized in a great reformatory managed on this plan ; 
there is " labor applied to public resources," and there 
is strict equity in the division of tlie proceeds. In such 
an establishment all the profits and more go to the 
laborers. Yet motives of immediate economy favor 
the letting of prison labor to contractors; and if the 
plan of working on state account shall ultimately pre- 
vail, it will be because of the opportunity which it 
affords of effecting the moral reformation of the prison- 
ers. Against such a gain no good government would 
weigh for a moment the petty economy to -be effected 
by other methods. Good government is, unhappily, 
not among the data of our own present calculations, 



196 THE PRINCIPLE OF COOPERATION. 

and the contract system may be an available compro- 
mise of interests ; jet if our state governments improve, 
they may be expected to favor more and more the sys- 
tem which gives the best moral results. Since, then, 
the cooperative form of prison industry has other than 
economic ends in view, it sheds no light on the labor 
problem. 

Public work-houses for tramps would be a natural 
adjunct of a reformatory system, and would help to 
dissociate the tramp question from the general labor 
problem. It would intercept anarchism near its source, 
and relieve the municipalities, on the one hand, and the 
labor organizations on the other. In so far as this 
measure would clear the market of men whose presence 
depresses wages, it would contribute indirectly toward 
improving the workmen's condition. It would not 
otherwise affect the mode of distributing wealth. If 
the great combinations now forming shall end by filling 
the market with idle men, such measures as this will 
have a new importance. 

\ Upon arbitration, profit-sharing, and full cooperation 
must be our dependence for the solution of the labor 
problem. These measures are named in the direct order 
of their availability, and in the reverse order of their 
intrinsic excellence. Arbitration is the easiest, and 
will doubtless have, in the decades immediately coming, 
the greatest extension. It is, however, only the more 
radical measures, those which merge classes now hostile, 



THE I'UINCIPLE OF COOPEItATION. 197 

tliat can insure a reign of permanent peace in the 
industrial world. Profit-sharing makes the workman, 
iu a sense, an employer; and full cooperation makes 
him Loth an employer and a capitalist. In neither 
relation is he a disturbing element, for in neither can 
he well fail to receive obvious justice, s/ 

The question which of the three modes of adjusting 
the rewards of labor shall ultimately prevail is to be 
determined, not by the comparative difficulty of the 
methods, but, as already shown, by their comparative 
excellence when they prove successful. Original fail- 
ures count for little, and the result of one successful 
experiment counts for much, in deciding the question of 
ultimate survival. That system will, in each particular 
field, survive and continue which, in that field, is per- 
manently the best. As different fields offer different 
conditions, it is improbable that any one method of 
industry will become universal. The three general 
systems may continue, each in the field to which it is 
specially adapted. 

The value of cooperation, partial or complete, is not 
limited to its effect on the men who directly par- 
ticipate in its benefits. A few cooperative establish- 
ments react on the condition of men who still work for 
wages; and this effect must become more marked as 
the system of arbitration shall obtain a foothold. Tri- 
bunals for adjusting wages will need a standard of 
justice, in making their awards. At first they may 



198 THE PRINCIPLE OF COOPERATION. 

proceed blindly, striving only to effect a rude comjjro- 
mise of opposing claims. They may " split differences," 
and content themselves if they thereby avert strikes 
and allow business to continue. Where the rate is a 
dollar, and the workmen claim a dollar and a half, they 
may give a dollar and a quarter. This would be a 
welcome escape from the present chaos, but it would 
not be arbitration of a highly developed form. 

In the end there must be standards of equity in the 
division of the products of industry. Certain propor- 
tions of a gross return will come to be recognized as a 
rightful reward of employers and of employed. The 
proportions will vary in different fields ; but if, in any 
field, a few profit-sharing establishments exist and yield 
good results, they will assist in setting the standard to 
which arbitration will conform. The rewards of labor 
under the wage system may thus be, in a measure, 
gauged by those which are realized under the system of 
shares. Profit-sharing, even on a limited scale, may 
dififuse benefits over the whole industrial field. 
J\ The cooperative principle in its different forms is the 
Christian socialism of Maurice, Kingsley, Hughes, and 
their worthy co-laborers. It meets an imperative hu- 
man need, and must grow surely, though not, as re- 
formers are wont to estimate progress, rapidly. Time 
is requisite for the development of its completer forms ; 
and if arbitration can tide over the interval of transi- 
tion, and secure outward peace until the conditions of 



THE PRINCIPLE OF COOPERATION. 199 

true fraternity mature, it will effect, by its indirect re- 
sults, the redemption of society. 

\/ The condition of success in any general system of 
cooperation is mental and moral progress. The perma- 
nence of republics has long been known to depend on 
these conditions ; they are short lived when the people 
are ignorant or bad.K Christian socialism is economic 
republicanism ; and it can come no sooner, stay no 
longer, and rise, in quality, no higher than intelligence 
and virtue among the people. 

\^t is only step by step that we can hope to approach 
the social ideal that is beginning to reveal itself. Im- 
patience at the conditions of natural progress is the 
root of political socialism.^ A few men have had vis- 
ions of an ideal state, not indeed the one which will 
exist in reality, when the better tendencies now at 
work shall be consummated, but an imaginary condi- 
tion in which countries shall become workshops under 
political control. Men are to be found possessing the 
infinite wisdom and virtue necessary for directing such 
operations as must be undertaken, and, by a greater 
miracle, these men, when found, are to be placed in 
power and kept there by popular elections. Human 
imperfections are a forgotten fact in the situation. 

The socialistic state would destroy personal freedom. 
It might be practicable, if men were morally perfect ; 
but it would be intolerable. Men will not want it in 
the millennium, and they cannot have it earlier. The 



200 THE PRINCIPLE OP COOPERATION". 

socialist does not propose to wait for the development 
of a perfect moral state before realizing his dream. 
Evolution is slow, and manufacture rapid; he will, 
therefore, make the ideal state with his own hands. He 
will plan it, and secure the popular decree that shall put 
it into operation. " Let there be socialism ; " and there 
will be socialism — over night, possibly: anarchy will 
put an end to the experiment in the morning. 
J^ Viewed on but one side the socialistic ideal has a 
beauty that captivates the intellect which fairly grasps 
it. It bursts on the view like an Italian landscape from 
the summit of an Alpine pass, and lures men over the 
fatal declivity. Individualism appears to say, " Here is 
the world; take, every one, what you can get of it. 
Not too violently, not altogether unjustly ; but with 
this limitation, selfishly, let every man make his pos- 
sessions as large as he may. For the strong there is 
much, and for his children more ; for the weak there is 
little, and for his children less." 

y*^ocialism appears to say, "Here is the world; take 
it as a family domain. Enjoy it as children, each ac- 
cording to his needs; labor as brethren, each according 
to his strength. Let justice supplant might in the dis- 
tribution, so that, when there is abundance, all may 
participate, and when there is scarcity, all may share in 
the self-denial. If there is loss of independence, there 
will be gain of interdependence; he who thinks less for 
himself, will be forced to think more for his brother. 



THE PRINCIPLE OF COOPERATION. 201 

If there is loss of brute force gained in the rude struggle 
of competition, there is gain of moral power acquired 
by the interchange of kindly offices. The beautiful 
bond which scientists term altruism will bind the 
Imman family together as no other tie can bind them." 

Sufferers under an actual system naturally look for 
deliverance and for a deliverer. The impression has 
prevailed among working men, that a new device of 
some kind might free them from their difficulties. 
Ideal socialism seems to meet this expectation, and 
those who preach it as a practical aim, naturally receive 
a hearing. The way in which the old system is de- 
fended is often as repulsive as the new system is at- 
tractive. When one teacher bids the poor submit, and 
another bids them hope, they will not be long in choos- 
ing between them. Yet there is no royal road to gen- 
eral comfort. There is much to be gained by studying 
the changes which are actually in progress, but nothing 
by inventing artificial schemes of society. The new 
dispensation is coming, but not with observation ; and it 
has no particular apostles. Very substantial have been 
the gains of recent years ; and in the promise of the 
future there may already be discerned an ideal sur- 
passing, in its attractiveness, the socialistic dream. It 
preserves, what socialism from the outset sacrifices, 
freedom. By steps which are never retraced' society is 
drawing nearer to it ; and the ideal itself is valuable, 
not indeed as something to be grasped by a frantic 



202 THE PBINCIPLE OF COOPERATION. 

effort, but as a means of lightening, by intelligent hope, 
the steps by which mankind are destined to approach 
it. 



CHAPTER XL 

NON-COMPETITIVE ECONOMICS. 

Competition is no longer adequate to account for 
the phenomena of social industry. What was once 
assumed as a universal law is now but partial in its 
operation. Economic science needs modernizing; it 
was a half-century after the publication of the Wealth 
of Nations that the earlier railroads were built, and it 
was a century after its publication that the great rail- 
way and telegraph monopolies were effected. During 
that century the economic activities of the world have 
gained, in intensity, more than they had done during 
the entire antecedent period of recorded history. 
Diversity of products, rapidity of exchanges and indus- 
trial organization are the criteria; and if we compare 
the condition, in these respects, of early Oriental mon- 
archies with the condition of the world in 1776, and 
that, again, with its present state, we shall find the 
second difference greater than the first. Steam and 
electricity, migrations and inventions, have brought 
this about. Economic theories adapted to a civiliza- 
tion midway in its development cannot apply equally 
well to a civilization at its present maximum. We 
need an economic science adapted to steam, or, more 



204 NON-COMPETiTiVE ECONOMICS. 

accurately, to an intensified social activity. The sys- 
tem of Adam Smith has advanced, but not sufficiently ; 
and what is lacking is more than the trivial adaptations 
sometimes attempted ; it is undetected principles. 

There is something deeper than competition in the 
economic life of men ; and the relation of competition 
to the underlying law has not been analyzed. The 
principle whereby the struggle of many men, each for 
himself, to secure wealth is made to work out the gen- 
eral good of all, has all the beauty that is claimed for 
it. We have noticed, however, in an earlier chapter, 
the moral limitations that hedge about this struggle. 
The contest is never unrestricted. A Spirit of Justice 
is ever standing over the contestants, and bidding them 
compete only thus and thus. This they may do ; that 
they may not do ; and the prohibitions increase with 
time. Competition at best exists b}^ sufferance, and/ 
the power that tolerates and controls it is moral. 1 

We have now to notice a still more decisive manner 
in which the moral sovereignty asserts itself. It not 
only regulates competition in its modes, but, at will, it 
thrusts the whole process aside. It is because there 
have long been departments of practical economy not 
left to competition, that there has always been, in 
science, some need of a province of non-competitive 
economics. It is because these activities are increasing 
apace with the rapid developments of the past century, 
that the need is now pressing. 



NON-COMPETITIVE ECONOMICS. 205 

We have seen that the ultimate end of poUtical 
economy is not, as is generally assumed, the mere quan- 
titative increase of wealth. Society, as an organic unit, 
has a higher economic end. That end is the attain- 
ment of the greatest quantity, the highest quality, and 
the most just distribution of wealth. It is the true 
subjection of matter, the placing of it in the most 
rational condition, absolute and relative. Tlie matter 
and force of external nature are to be brought into 
that state which, in itself, is best, and they are to be 
brought into that relation of ownership which best 
promotes the general happiness. Matter modified by 
labor in accordance with enlightened reason may be 
termed rational wealth ; it is this that society is pur- 
suing, and partially realizing. 

The actual wealth of society varies more or less from 
the ideal standard, and is but partly rational. Much 
of it is not of high quality, and much that is so is not 
well distributed; it is but partly beneficent, in itself, 
and in its relation to owners. Immoral books, poison- 
ous beverages, and adulterated articles of food are 
wealth of an actual but irrational sort; so also are all 
things that minister to vice. These are real commodi- 
ties, because, somewhere in society, are men whose 
impulses crave them ; they are irrational, because the 
reason that is inherent in society as a whole does not 
want them, and would cast them out if it could. 

The want of a true teleology, the failure to discover 



206 NON-COMPETITIVE ECONOMICS. 

the TeX-09, or ultimate goal of social tendencies, and the 
consequent failure to discriminate between actual and 
rational wealth, does not, indeed, deprive current polit- 
ical economy of its practical value ; but it lessens that 
value, and throws the system more and more out of 
harmony with the modern spirit. A little while hence, 
and the omission will be disastrous. 

The competitive mode of production and distribution 
has been adopted by society because, in its day, it has 
given the nearest practical approximation to the stand- 
ard of rational wealth. Imperfect as are its results, 
those of any other system would have been more im- 
perfect; they would have rendered the wealth of so- 
ciety less, worse, or worse distributed. As compared 
with them, the principle of competition has increased, 
improved, and with rude equity divided the products of 
industry ; and for this reason only has it been tolerated. 

The vast residuum of competition which still exists 
continues to do a similar work, and owes to this fact its 
prospect of survival. Inherently it has no vitality ; it 
needs and possesses a raison d'etre^ and, in the absence 
of it, would cease to exist. It rests on moral law. In 
the department of distribution its working maj^ be less 
perfect than in that of production. It may be but a 
spontaneous and imperfect agent for dividing wealth, 
with approximate justice, among the members of soci- 
ety ; yet it is only because it serves this purpose, and 
so long as it does so, that it is tolerated ; and there 



NON-COMPETITIVE ECONOMICS. 207 

never was a time when it would not have been thrust 
aside, could society have seen its way to the adoption 
of another method which would more nearly have real- 
ized the rational end in view. Powerful as the com- 
petitive principle appears in practice, it is not supreme, 
still less, self-existent ; it is the creature of an exigency, 
created as the rude servant of a higher power, and con- 
tinuing by sufferance. It is perpetually on trial, and 
its minutest acts are subject to the scrutiny of that 
supreme moral court to whose verdict all systems, erco- 
nomic as well as civil and legal, must submit. 

Society does not and will not completely abandon the 
competitive principle ; it is still needed as an agent of 
distribution, and it is the sole means on which we can 
rely for the securing of a large product to distribute. 
Yet, if what we have claimed be true, society should 
hold this agent in abeyance within limited fields of in- 
dustry, whenever, within those limits, a better system 
is avaihible. This it actually does. Sometimes, as 
in railroad operations, competition works sluggishly, 
interruptedly, or not at all ; sometimes, as in the 
transactions of labor and capital, it works, for a time, 
one-sidedly and cruelly, and then almost ceases to do 
its work. It may happen that, in exactly that field 
in which competition operates unusually ill, another 
method may operate especially well, and th€ compar- 
ison of results may be in favor of the latter. If once 



208 NON-COMPETITIVE ECONOMICS. 

society becomes conscious that this is the fact, farewell 
to one particular form of competition. 

That the future field of non-competitive economics 
will be vast is less surprising than that its present field 
is considerable. Arbitration promises to replace the 
former agent of distribution in a comprehensive way. 
Cooperation is the antithesis of competition ; wherever 
it exists the competitive struggle is held, to some ex- 
tent, in abeyance. In practice cooperation is most 
frequently of an incomplete kind, and a greater or 
less residuum of competition remains ; but any real- 
ization of the one principle means the elimination of 
somewhat of the other ; and, moreover, whatever is 
done by a public or governmental agency is done, in a 
sense, cooperatively. What we have now to consider is 
a certain displacement of competition which is of long 
standing, and which, therefore, serves to show that 
society has always been ready to set the process aside, 
whenever it has been able, by other means, to better 
attain the rational end which it has had in view. 

It is the misfortune of the narrow and illogical defi- 
nitions of wealth formerly current, and not yet en- 
tirely abandoned, to exclude from their classification 
much that is really wealth ; and the excluded portion 
is, to a great extent, of the highest and most rational 
quality. It embodies itself often in tenuous and un- 
substantial matter, as in the vibrating particles that 
constitute light and sound; but it ministers to the 



NON-COMPETITIVE ECONOMICS. 209 

highest wants of human nature, and is tributary to true 
and permanent happiness. As we formerly endeav- 
ored to show, these finer commodities are to the soul 
what those of the grosser sort are to the body; and if 
man is dependent on literal bread for life, he is depend- 
ent on loaves of a more spiritual sort for a life that is 
worth the living. 

Now these most rational forms of wealth have regu- 
larly been distributed on more or less communistic prin- 
ciples. Beauty and truth have never been monopolized 
and sold to the highest bidder. Public agencies have 
embodied them in the delicate material forms that come 
within our definition of wealth, and have distributed 
them freely to all, as the Roman emperors distributed 
the corn of Egypt. Not that all such commodities have 
been so distributed ; the competitions of the market 
have determined the ownership of some of the costliest 
of them. There has been an interesting intermingling 
of cooperative and competitive action in this depart- 
ment, and it will be instructive to ascertain the limits 
where the one process ceases and the other begins. 

From the days of Athens until now the best products 
of art have been, under one or another form of pro- 
cedure, purchased by the public and assigned to the 
general use. Statues by the Greek masters were in 
temples or on the street. The greatest architectural 
works of the Romans were public theatres, baths, 
basilicas, fora, and temples. The early Christian com- 



210 NOX-COMPETITIVE ECONOMICS. 

munity, a state within a state, expended its best efforts 
in the adornment of churches; and the triumphs of the 
Renaissance were in works of this kind. Most of the 
works of the great masters are now free for the enjoy- 
ment of alL 

Yet, from the first, also, many products of art have 
been sold in the open market and purchased for jmvate 
use. Wealthy men have always, whether from taste, 
vanity or both, been consumers of artistic products. 
The amount of this consumption was small in Greece, 
larger in Rome, small again in the early Christian state, 
and even at the period of the Renaissance, but is 
increasingly large in recent times. The accumulation 
of vast fortunes in our own country may be expected 
to increase this tendency ; while the frequent gift or 
bequest of private fortunes for purposes of public 
benefit may be expected to proportionately increase the 
amount of such products placed at the free disposal of 
the people. This is one regal function of the money 
king. Rational wealth in sesthetic form is, in great 
part, owned and enjoyed non-competitively. 

This free disbursal of valuable products is distribu- 
tion of an extraordinary kind; and, singularly enough, 
it in ho way changes the relation of employers to the 
employed. Competition is, by this means, suppressed 
only among the consumers of particular articles ; the 
industrial groups which produce them are not affected. 
Artists strive to excel each other in the quality of their 



]^ON-COMPETITIVE ECONOMICS. 211 

work, and receive for it the price determined in the 
open market by ordinary laws. This producing group 
receives its share of the general wealth of society in the 
same manner as others, and subdivides it among its 
individual members in the same way. The artist must 
pay his assistants the market price for their labor. The 
supplanting of competition consists in the fact that 
other groups get works of art without being obliged 
to buy them, and to bid against each other in securing 
them. Society pays for the products which it thus 
disburses from the proceeds of taxes; and, as these are 
gauged more or less according to the property of the 
persons who pay them, while the products purchased 
by the means are placed at the free disposal of all, it 
would seem that, here at least, men realized the social- 
istic ideal, producing according to their ability, and 
consuming according to their need. 

Yet the consumption of such products is gauged, not 
by general need, but by inclination and opportunity ; 
and in this difference lies the basis of the system of 
disbursing rational wealth. Were competition to deter- 
mine the amount which each person might enjoy of 
these fine and costly products, the poor would get none 
of them ; and, in accordance with the law cited in an 
earlier chapter, they would lose their desire for them. 
This would involve a personal deterioration ; and it is 
this which the state interposes to prevent. For its own 
reasons it determines that men shall not thus degener- 



212 NON-COMPETITIVE ECONOMICS. 

ate ; that they shall be educated to desire and to use 
the refining products of the artist's labor. The ulti- 
mate purpose is non-economic ; it is to elevate the 
nature of individual men, and to make the state sounder 
and safer. Yet the process contributes to the eco- 
nomic end of society ; it enables men to advance directly 
toward the summum honum of industrial action. It 
keeps alive the popular demand for works of art, and 
insures the continued production and consumption of 
many of the better forms of wealth. 

Commodities which minister to the desire for knowl- 
edge come next in order, in the extent to which they 
have been disbursed at j^ublic expense. Oral instruction 
has not always been free, and books have been so still 
less frequently. In the later ages of the world, how- 
ever, schools of some sort have been cheap enough for 
all but the very destitute, and this cheapness has been 
the result of some form of public action. Commodities 
embodying knowledge have been either given to con- 
sumers or sold to them for less than their cost. The 
mediaeval church assumed this governmental func- 
tion among others. The modern public school is either 
entirely free or so nearly so as to throw its chief cost 
upon the State, and open it to universal use. 

Endowments may be regarded as being, originally, 
gifts to the public, though administered without official 
intervention ; and schools established on this basis are 
not, as far as the enjoyment of their products is con- 



NON-COMPETITIVE ECONOMICS. 213 

cerned, to be separated, in principle, from other public 
agencies for producing and disbursing those commodi- 
ties which are food for the intellect. The endowed 
colleges of England and America are, in their effect on 
students, public institutions. While these agencies are 
distributing oral instruction in a manner more or less 
independent of competition, free libraries, endowed or 
otherwise, are doing the same for the more substantial 
instruments of education. Here again there is an ulte- 
rior end in view ; the welfare of citizens and the safety 
of the State demand the free disbursal of these products. 
Yet the economic effect of the process is real and im- 
portant, and public instruction demands consideration 
from the economist, as well as from the educator and 
the statesman. Rational wealth in the forms that 
nourish the intellect is, to a great extent, distributed 
non-competitively. 

There are times when the Church is to be regarded as 
one of the departments of the State ; the material appli- 
ances of religion then fall in the same category as those 
of education and artistic culture. The State for ages 
nourished the heart as well as the taste and the intellect. 
The peculiarity of modern times and of our own country 
is the discontinuance of this process. In America, 
State and Church have separated ; and, while the State 
retains the instruments of instruction, and,- to a great 
extent, those of aesthetic culture, it has thrown the 
distribution of religious nutriment back into the market. 



214 NON-COMPETITIVE ECONOMICS. 

It feeds the intellect and the taste, but leaves the heart, 
like the body, to be nourished by each man for himself. 
Yet the necessities of the case have not admitted of free 
individual action in this department. Men cannot ob- 
tain the needed sustenance separately, and voluntary 
cooperation has at once assumed the function abandoned 
by the State. Churches are the best established of 
cooperative societies, and their economic functions are a 
fascinating subject of the non-competitive division of 
political economy. 

In a few countries governmental cooperation is ex- 
tended over the field of railway transportation ; and 
that the same will, ultimately, be the case in America 
is the belief of some persons who realize the evils of 
railroad combinations, but fail to see the good which 
comes from such competition as still exists in this de- 
partment. Pools do not prevent companies from striv- 
ing to surpass each other in perfecting their methods, 
and in securing, by efficient management, a large pro- 
duction of wealth. Here, under a rSgime of fixed rates 
for transportation, lies their sole chance of increasing 
their profits. 

The incentive to a state management of railroads is, 
in principle, identical with that which prompts to the 
forms of non-competitive action already noticed. The 
object is to insure the production and disbursement of 
forms of wealth which are essential to the public wel- 
fare. It is not, however, the regular products of rail- 



NON-CO^NIPETITIVE ECONOMICS. 215 

way operations that are concerned, but certain special 
products, the study of which will reveal an important 
and, as yet, unanalyzed economic principle, which we 
may term that of inappropriable utilities. 

Labor imparts utilities to matter, and the impulse to 
it is that these may be enjoyed by the laborer. To be 
enjoyed they must be owned ; the fruits that the la- 
borer raises or the implements that he fashions must 
belong to him, and to no other person. It is the nature 
of some utilities to be taken completely into the posses- 
sion of him who produces them. Others, however, 
elude him. It is the nature of certain utilities to flee 
from him who creates them, and diffuse themselves 
among the members of the community. The builder 
of a house is able to appropriate the greater portion of 
the utility created. The roof shelters and the walls 
enclose that which makes his life enjoyable. If the 
house be comely in form, and attractive in surround- 
ings, he has the most constant enjoyment of its beauty. 
Yet this enjoyment cannot be monopolized ; the taste- 
ful exterior of the dwelling, with the beauty of its 
shade-trees and lawn, create an inappropriable utility 
which distributes itself among neighboring proprietors. 
Its presence is indicated, and its measure expressed, by 
the increased price of adjoining property. 

In the case of railroads the inappropriable utilities 
are so sfreat as almost to overbalance those which can 
be retained by the owners. The railroad creates a 



216 NON-COMPETITIVE ECONOMICS. 

value far in excess of that which its projectors can 
realize ; and this distributes itself among the adjacent 
population, and appears in the enhanced value of lands 
and the increased rewards of general industry. It has 
often happened that a railroad which enriched the popu- 
lation of the section which it traversed, rendered its 
projectors bankrupt. 

The granting of public aid to railroad companies is a 
recognition of the principle of inappropriable utilities; 
it is a payment, by the public, for a value which the 
company is compelled to transfer to it from sheer in- 
ability to retain it for itself. The land grant is a crude 
mode of effecting this payment, which has very properly 
been discontinued because of the abuses which it has 
entailed. The values created attach in part to the 
lands granted to the company, and in part to the alter- 
nate sections which, by the practice of our government, 
have been reserved for itself. The public and the com- 
pany thus share equally in this particular benefit. 

Much of the utility created by the building and 
operation of the railroad remains inappropriable. The 
important fact is, that this portion becomes a matter of 
indifference to the corporation. Benefits which the rail- 
road company confers, but for which it can secure no 
reward, are of no consequence to it ; they may, there- 
fore, be sacrificed with impunity. Through the work- 
ing of this principle of inappropriable utilities, much of 
the welfare of large populations is intrusted to corpo- 



^■ON-COMFETJTlVE ECONOMICS. 217 

rations having no interest in maintaining it. It will be 
subserved as long as the company has nothing to gain 
by sacrificing it, not longer. 

Recently, in our country, the company or its man- 
agers have often had something to gain by sacrificing 
the welfare of the inhabitants of the districts through 
which they pass. Discriminating rates for transportah 
tion, as well as other abuses, have recklessly made or 
marred the welfare of sections of the country. The 
State is involved in this ; it has an interest in the elu- 
sive but real utilities wliich a railroad, properly man- 
aged, scatters throughout a land. Can it best secure 
them by supervising the railways or by owning them ? 
Experience thus far strongly favors the former alterna- 
tive, as both more profitable and more safe. That 
which places the regulating and the owning of railroads 
by the state in the same category with public education 
is the fact that in both cases does a public agency 
intervene in order to secure the general diffusion of im- 
portant utilities. 

It is evident that the principle of inappropriable util- 
ities is applicable to every form of industry in which 
the community has an independent interest, and in 
especial to those of an educational and religious charac- 
ter. The exemption of institutions of this kind from 
taxation is a partial refunding of the value diffused by 
them through the community. 

There is, then, a province of economics not ordinarily 



218 NON-COMPETITIVE ECONOMICS. 

recognized, because wholly or partially outside of the 
range of competition. The province has long been a 
considerable one, and the changes now in progress, the 
development of the system of arbitration and of that of 
cooperation, will ultimately give to it a vastly greater 
extension. A portion of it has failed to receive atten- 
.tion from economists in consequence of illogical concep- 
tions of wealth, which excluded its highest forms, and 
thus restricted the scope of economic science by ruling 
out entire provinces of industry. Reinstate these de- 
partments of economic life, recognize the true wealth- 
producing function of such agents as the church and 
the school, and the extent and importance of the non- 
competitive division of political economy becomes ap- 
parent. We have hastily traced the boundaries of this 
division, with especial reference to the older portion of 
it. The free disbursal of products essential to the pub- 
lic welfare, has been secured by a departure from ordi- 
nary distributive methods. The ground of the radical 
difference between the two economic methods is a 
matter of both scientific and general interest, and we 
have found it in a teleologic principle in society, a quest 
for a wealth that, in quantity, quality, and distribution, 
shall conform to the requirements of enlightened reason. 
Within the limits which we have indicated, society has 
better attained its end by abandoning its usual competi- 
tive mode of action. 

We have aimed, incidentally, to bring into view the 



NON-COMPETITIVE ECONOMICS. 219 

sovereigntj^ of moral law in the economic practice of 
the world. If competition were supreme, it would be 
supremely immoral; if it existed otherwise than by 
sufferance, it would be a demon. Nothing could be 
wilder or fiercer than an unrestricted struggle of mil- 
lions of men for gain, and nothing more irrational than 
to present such a struggle as a scientific ideal. If it be 
pruned of its greater enormities, as in actual life is 
done, if combinations restrict its field, and if arbitration 
and cooperation assume some of its functions, it still 
requires discernment to see the agency of moral law 
amid the abuses that remain. If, however, the sole end 
for which the process is tolerated is the suppression of 
greater and more general injustice, and if a superior 
power is ready to abolish it wherever it fails to fulfil 
this end, it may be classed, not as an ideal, but as an 
available means of approaching an ideal. In this view 
only are we secure from the blank confusion of suppos- 
ing that the comprehensive field of economic life is 
alone outside of the controlling influence of morality. 
The insight that can detect providential design in the 
uglier forms of external nature, should detect it, also, 
in the repulsive phenomena of organized industry, in 
the " higgling of the market," the altercations of the 
civil law, and the ignoble scramble for personal profit. 

As thus apprehended, there is no apotheosis of selfish- 
ness in the theory of political economy, and there is no 
necessarily corrupting effect from the practical " out- 



220 NON-COMPETITIVE ECONOMICS. 

working of its principles. Recognizing the competitive 
struggle, wherever it survives, as the imperfect agent 
of moral law, a man may participate in it without taint. 
The bad effects of the contest he does not need to 
suffer; and to the lower levels, where the golden calf- 
worship is unhindered and blighting, he does not need 
to descend. It is his privilege to live on the moun- 
tainous slope at the summit of which moral law reigns. 
He may buy, sell, and get gain, as well as give thanks 
and worship, with his eyes uplifted to the hills whence 
cometh his help. 



CHAPTER XII. 

THE ECONOMIC FUNCTIOlSr OP THE CHURCH. 

The daily bread of the world is the chief subject 
of political economy. If men were purely material, 
physical nourishment would suffice for them ; but 
spiritual natures require spiritual nutriment. If what 
furnishes this nutriment were a purely immaterial 
thing, it would, as such, be removed from the domain 
of wealth, and thus from the field of economic science ; 
but it is not so. It has, in fact, a material basis, and 
falls within the limits of the economist's studies ; the 
students of this science have other than literal loaves 
to consider. 

The consideration of forms of wealth which minister 
to spiritual wants is, indeed, necessary in the interest 
of religion. Certain modern religious problems need 
to be approached as well from the material as from the 
spiritual side ; it is the economist who can, if he will, 
point out the chief danger which threatens the church. 
That which now concerns us is the fact that such a 
study is necessary in order to complete the science of 
political economy. 

We have already noticed the wide range of applica- 
tion which current definitions of wealth must have if 



222 THE ECONOMIC FUNCTION OF THE CHUKCH. 

consistently adhered to. While wealth always has a 
material basis, that basis is not necessarily solid or 
durable. Vibrations of air may be shaped into artistic 
form by the violin or the voice, and become com- 
modities as truly as the stone which is shaped by the 
sculptor's chisel. Such products as musical notes, 
perishable as they are, produce lasting effects on the 
mind, and are valuable accordingly in the market. 
Concert tickets convey a title to them, and these are 
not to be had without money. The delicate material 
commodities which diffuse themselves, for a time, 
through the concert hall, are essential to the spiritual 
effects which follow from their use ; there could be 
none of the mental effects of music without the material 
undulations. As long as tremulous air thus holds 
within itself the power to impress the soul of man, it 
is subject for the economist ; it is his business to investi- 
gate its laws as wealth. When these effects exist only 
as impressions on the mind, he may turn them over to 
the metaphysician ; they are commodities no longer. 
Bread is a commodity only while on its way from the 
oven to the organ of digestion ; after that it is subject 
for the physiologist; and that form of bread for the 
mind which we term music is, in like manner, a com- 
modity only while in transitu. 

Musical forms are not the only ones that can be 
impressed on vibrations of air. Marble may be chiselled 
into letters as well as images ; and air vibrations may 



THE ECONOMIC FUNCTION OF THE CHURCH. 223 

be shaped into forms of intelligence as well as into 
those of beaut}^ Spoken words may be commodities 
in the market, as well as musical notes. They are 
recognized as such ; lecture tickets sometimes convey a 
title to them, and these are property, sold and paid for. 
A preacher's spoken word has, in like manner, its place 
on the inventory of social wealth ; sermons, as deliv- 
ered, are property. The hymn and the sermon are to 
be regarded as forms of nutriment for the soul, which 
are commodities while in transitu from their source to 
the organ of spiritual digestion. 

Regarded in the prosaic light of economy, church 
edifices become places where spiritual nutriment is 
disbursed. Forms of wealth which minister to spiritual 
wants are here produced, distributed, exchanged, and 
consumed. Economic law^s are general, and apply to 
higher as well as lower forms of wealth. Sj)iritually, 
we dine in commons, on the cooperative principle, once 
a week, with occasional lunches between whiles. The 
clergyman is a minister, in that he provides and dis- 
tributes food. In former years the meals were prepared 
with Spartan simplicity ; but of late they have been 
greatly elaborated. In spiritual as in physical meals, it 
is the appetizing element that is expensive ; reduced 
to simple nutriment, a meal of either kind could be had 
very cheaply. 

There is, then, a department of economic science 
w^hich considers forms of material wealth which minister 



224 THE ECONOMIC FUNCTION OF THE CHURCH. 

to spiritual wants. The relations of rich and poor are 
alike in the lower and the higher economic depart- 
ments. The highest forms of wealth have their laws of 
distribution, and, in the course of social development, 
large classes are deprived of them. The laws of 
spiritual poor-relief are of importance to the economist. 

The kind of spiritual poor-relief to be discussed here 
does not fall under the head of charity. Place a dozen 
men, each in his own boat, on the open sea, and start 
them for the nearest land. They are on an equality 
and completely independent. If any will not row, his 
destruction is on his own head. If any try to row and 
fail, it is the great law of charity, and that only, which 
constrains another to help him. If any venture to 
burden himself by towing a weaker brother to the 
shore, he is compelled to do so by no law legal or 
equitable, but the universal law of love. 

But that is no picture of actual society. No man 
can paddle his own canoe as a member of that great 
social organism in which each individual labors, not 
for himself, but for the whole, and is dependent on the 
whole for employment and for pay. Independence is 
the law of isolation ; interdependence is the law of 
society. Again and again, in actual history, society 
ceases to desire the product of a particular man's 
labor. The organic whole is in the position of em- 
ployer to the millions who work, and it cannot always 
keep them busy; but it is not at liberty to starve 



THE ECONOMIC FUNCTION OF THE CHURCH. 225 

them. It may take away their comforts ; but, if it 
take their lives, it is murder. Civilization has placed 
us all in one boat ; by mutual help we are sailing the 
homeward-bound ship of humanity. He who will not 
help may be thrown overboard, possibly ; but he who, 
by force of circumstances, cannot, must be carried to 
the end. 

It is thus in the nature of the social organism that the 
great principle of English law which asserts the ultimate 
right of every man to a maintenance finds its philo- 
sophical ground. That is an evil teaching which 
ventures to question this principle, and it would fare ill 
with a state which should attempt to follow such 
teaching in practice. Such action would surrender to 
the communists the championship of a great truth ; it 
would place society in the wrong, and revolutionists in 
the right. 

When a man who has had no hand in getting his 
neighbor into trouble, lends his aid in getting him out, 
that is charity. When an organized society relieves 
suffering which the society as a whole has caused, that 
is justice. Whatever part of the poor-tax goes to 
relieve sufferings resulting from general social causes, 
is paid, not given ; the claim to it is as equitable as that 
of any officer to his salary. . We may assume as a 
premise the principle asserted in the poor-law of Queen 
Elizabeth, which established the right of every man, 



226 THE ECONOMIC FUNCTION OE THE CHURCH. 

not to be kept in idleness, indeed, but to be kept, while 
willing to work, from absolutely starving. 

The higher nature may starve as well as the lower ; 
and the duty of preventing such starvation has hereto- 
fore been made to rest mainly on spiritual grounds, and 
presented as a high order of charity. We place it on 
the ground of justice. The soul of man is not inde- 
pendent ; the organic union of mankind includes mind 
as well as matter, and it is its nature, in every relation, 
to absorb and to subordinate the individual lives which 
are its molecules. He who is born into such a society 
is never independent in body or mind. 

The healthy life of the soul of individual man is prac- 
tically dependent on material aids ; the higher life of 
the social organism is absolutely so dependent. Inter- 
communication is necessary to it. Sometimes by im- 
pressing forms of intelligence on insubstantial air, 
sometimes by printing them on more durable paper, 
an. interchange of thought and feeling is established 
which unites the life of individuals into a single whole ; 
it gives to society an organic soul. 

That universal society, which, without any reference 
to particular sects, we term the church, controls the 
material aids to religious life. These aids are forms of 
wealth. The place of worship with its furnishings, the 
Bibles and books of song, much of the music, and most 
of the spoken words, are property, bought and paid for. 
Economic science stops at nothing in asserting its juris- 



THE ECONOMIC FUNCTION OF THE CHUKCH. 227 

diction over what really belongs to it. It claims, even 
to the farthest echo, the sound of the chimes that call 
the worshippers together, when the paid organist rings 
them. It ventures to claim the material instrument, 
air vibrations still, by which the prayers of the assem- 
bled multitude are held in unison and made to become 
the prayer of an organic whole. There, however, its 
audacious foot halts. The prayer itself is none of its 
property; only the strictly material instrument that 
expresses it. We have penetrated, in our scientific 
temple, to the Gentiles' court, where buying and selling 
are admissible ; the inner sanctuary we may not enter. 

Living not by literal bread alone, but by spiritual 
impulses, foot-pounds of dynamic force which originate 
beyond the sphere of matter, but diffuse themselves 
through society by material means, man may starve 
spiritually in consequence of material privation. Such 
a famine is an economic fact, full of peril even to the 
lower interests of society. The duty of averting it 
has been recognized by civilized states, and a free dis- 
bursal of the means of intellectual and aesthetic culture 
has partly accomplished this end. The distinctively 
religious portion of this food for the mind has, by some 
governments, been included in the public disbursal. 
That our own government has surrendered this function 
has been due, not to any undervaluation of- the end to 
be gained, but to an inability to gain it by state action. 

The general conservation of moral energy is, indeed, 



228 THE ECONOMIC FUNCTION OF THE CHUECH. 

not altogether surrendered by the government; codes 
of law are efficient educators. The religious depart- 
ment of popular education has been handed, as a sacred 
trust, to voluntary organizations ; and the duty rests on 
them, in simple fidelity to the state, of continuing that 
free disbursal of the highest products of human effort 
which has always been essential to the public welfare, 
and which is becoming doubly so, as the competitive 
forms of industry diminish, and as the newer processes 
of distribution increase. 

The church has not been indifferent to this trust ; it 
is the great giver of modern times. Not a week passes 
that it does not scatter its valuable products through- 
out the community. That which costs millions of 
dollars is, in this way, offered without reserve to who- 
ever will take it. The offer is not wholly rejected ; in 
the evening services of most churches, and in the morn- 
ing services of many, there is seen a free disbursal of 
the products on which the state is becoming more and 
more dependent. Mere denunciation of the church for 
delinquency in this direction is as mischievous as it is 
unintelligent. 

It is, of course, to be expected that, like the other 
agencies which dispense rational wealth, the church 
should procure what it disburses in the ordinary mer- 
cantile way. The cost of its products is governed by 
ordinary laws. It must pay for buildings, furnishings 
and books the prices which demand and supply deter- 



THE ECONOMIC FUNCTION OF THE CHURCH. 229 

mine. It must hire musicians and preachers at salaries 
which the tests of the market determine for their 
services. It is the disbursal of the products that should 
not he competitive. Here the principle of free giving 
to all who will accept should, in the interest of societ}^, 
prevail, and the cost should be defrayed by non-mer- 
cantile methods. It may be that all who receive the 
products should contribute to the expense of creating 
them ; but they should not buy them, and should cer- 
tainly not buy the spiritual nutriment which the church 
offers in a vitiated form, or in combination with a base 
element attached to it for the purpose of making it 
saleable. This method of corrupting the merchandise 
of the church we shall examine. 

The present industrial condition has come suddenly 
upon societ}^ ; and it is partly for this reason that the 
interaction of economic and spiritual forces has only 
begun to receive attention. The trend of the old 
j)olitical economy was in the reverse direction ; and we 
are but just becoming fully conscious that the industrial 
system depends absolutely on moral influences, and 
that these depend on material aids. 

Even recent and valuable studies of the causes which 
have alienated workingmen from the church have 
failed to present clearly the distinctively economic 
element in the situation. This element is all that 
it is either desirable or legitimate to present here. 
Certain causes have vitiated the highest products 



230 THE ECONOMIC FUNCTION OF THE CHUliCH. 

of human effort, and liave changed for the worse the 
mode of disbursing them. A low mercantile principle 
has, in an insidious way, acquired a degree of control 
over one department of church activity. Without the 
conscious acquiescence of the members of the church, 
and, of late, even against their wishes and efforts, the 
organization has become entangled in the meshes of 
the commercial system which environs it, and so ceased 
to be, to the extent which the public interest demands, 
the free disburser of rational wealth. 

The causes and the effects of this half-unconscious 
breach of trust fall partly within the limits of economic 
study. There is difficulty inherent in the plan of 
maintaining different social classes at the same table, 
literal or spiritual. Under a rSgime of Spartan sim- 
plicity a community may be conceived of as dining 
literally in commons ; but it is Spartan broth that they 
would get. Repeal the wise laws of Lycurgus against 
luxury, and the rich will soon have a table to them- 
selves ; and the manner in which this will come about 
illustrates what is occurring at our spiritual dining- 
table. With gold in his pocket, instead of corroded 
iron, a Spartan communist would want something bet- 
ter than barley soup. Under such circumstances the 
quality of the food would be likely to be improved. 
Under the influence of strong fraternal feeling the 
poor might remain for a time ; but to pay their share 
would be burdensome, and to remain as beneficiaries 



THE ECONOMIC FUNCTION OF THE CHURCH. 281 

would be irksome. They would gradually withdraw, 
and each withdrawal would facilitate the process of 
improving the quality of the meal and increasing its 
expense. The process would naturally continue until 
the wealthy should be left alone in the enjoyment of an 
elegant and costly entertainment. 

Such a case is ideal ; but it becomes actual when we 
consider not physical but spiritual living. The Puritan 
church of America lived in voluntary commons, in 
extreme simplicity. Its spiritual diet was nourishing, 
but the opposite of luxurious. Two centuries have 
seen the growth of differences of wealth, the adoption 
of a more luxurious spiritual table, and the withdrawal 
of a majority of the poor. 

The introduction of costly elements into religious 
services might not have been a vitiating element in the 
disbursal of moral nutriment, had the needed revenue 
come from the public treasury. It appears not to have 
that effect in the Roman Catholic church of European 
countries. The' revenue system of the American 
Protestant church is the peculiar product of a mercan- 
tile age. It is not too much to say that this organization 
has, in comparative unconsciousness, developed the 
most unworthy form of mercantilism which the old. 
economic regime has brought into existence. The com- 
petitive system, in its latter days, has laid an evil hand 
upon the activities of the church. 

We noticed, in an early chapter of this book, the 



232 THE ECONOMIC FUNCTION OF THE CHURCH. 

dominant influence of fashion in the production and 
sale of many utilities. The product which has a caste- 
making power becomes thereby an object of intense 
desire. The costliest products of nature and art com- 
mand their price because they act as badges of social 
station. Give to the homeliest article of common 
necessity a supplementary power to mark its possessor 
as a superior atom in the social organism, and he will 
pay a high price for it. The garment that is cut 
according to the latest mode appeals to a simple natural 
want and to personal vanity at the same time. The 
jewel that is to-day in vogue satisfies an aesthetic want 
which counts as one, and an ambitious craving which 
counts as ten, in the determining of its market value. 
Each of these products is a composite of rational utility 
and vanity; and each depends on the latter element 
for its costliness. 

The church makes, for financial reasons, a similar com- 
bination ; and the disastrous feature of the process is 
that the baser and costlier element here vitiates the 
better one. The church does not literally sell the 
gospel ; it practically gives it away, and gets a revenue 
from the base tinsel which it combines with it. It 
rents pews, and so grades them as to appeal to the 
same subtle weakness of human nature which gives a 
high market value to everything which has a caste- 
making power. He who pays for one pew ten times 
the price that would secure another differently located 



THE ECONOMIC FUNCTION OF THE CHURCH. 23B 

pays little or nothing for spiritual .nutriment ; he pays 
something for comfort, and much for the gratification 
of that subtle ambition which everywhere craves the 
high places in the social gradation. The proceeding 
draws lines of caste, in indefinite number, throughout 
the audience-room, and invokes, for the purpose of 
raising a revenue, a spirit which is well known to be 
fatal not only to the success of the spiritual work for 
which the church was founded, but also to the success 
of the work which the state demands of it in the new 
industrial era. 

If a new and higher type of industrial organization 
shall develop from the present chaotic condition, it will 
be one that will have, as its distinctive principle, frater- 
nity among men. It will harmonize warring elements, 
and enable humanity to live by accepting, as a great 
family, the bounty of nature, working in harmony and 
dividing the fruits of labor in peace. As the fountain- 
head of the chief moral and spiritual influence, the 
church should be the great unifier, the principal author 
of that fraternal spirit on which higher industrial de- 
velopment depends. It is, in fact, the promoter of 
class antagonism; by its method of gaining a revenue 
it is widening the gulf that needs to be closed. 

A church that openly appeals to the caste spirit de- 
stroys its power to assimilate the multitude for whose 
welfare it exists, loses its vitalizing principle, and 
becomes a lump which, though in itself it were manna. 



234 THE ECONOMIC FUNCTION OF THE CHURCH. 

will not leaven a measure of meal, though it lie hidden 
in it forever. Wiser than the children of light are the 
members of the friendly societies, secret orders, and 
trades unions which modern economic tendencies have 
developed. Whatever of moral nutriment they dis- 
burse they scatter among their members on a demor 
cratic principle. The church must do likewise or 
surrender its moral leadership. It must fight the 
caste-making tendency as it would the Spirit of Dark- 
ness, and not foster it,- Demas-like, for the revenue 
which it offers. 

Entering on a course that is as full of peril as it is of 
promise, society demands that every moral agency shall 
be in the fullest working order. Least of all can it 
dispense with the work that addresses itself directly to 
the personal character of individual men. Everywhere 
we hear the appeal to the church, as the agent that 
can most efficiently aid in the economic redemption of 
humanity. There can be no retreat in the general 
course of moral progress upon which the world has 
lately entered ; and institutions as well as men are to 
be sifted by it. " On earth peace ; " such is the fruit 
by which we are to know a church that is true to the 
mission for which it was founded. Fraternity is the 
result and the test of true Christianity working through 
sound economic forms. This test, if intelligently ap- 
plied, will be found to condemn, not the spirit of the 
church, but its outward methods. That the organiza- 



THE ECONOMIC FUNCTION OF THE CHURCH. 235 

tion which now broadens the gulf between social classes 
may become the chief agent in closing it, there is 
needed, not the miracle of a totally new spirit among 
its members, but the adoption of outward forms less 
mercantile than those now prevalent, and more in 
harmony with the new economic era. 

It is sometimes said that men must be actuated in all 
their dealings by Christian love, if the labor question is 
ever to be settled. This is demanding a transformation 
of human nature, and is equivalent to abandoning the 
hope of securing a favorable issue of the contests now 
in progress by means of forces at present available. 
Humanity is approaching the Christian ideal surely 
and not always slowly ; it will be nearer to it next year 
than it is now, and it will doubtless be appreciably 
nearer to it when the next generation is upon the field 
of action. More generations must pass than any one 
can estimate before the ideal will be fully attained ; 
and in the meanwhile the social conflict is upon us. 
Have we nothing to oppose to the brute forces that, In 
a night, as it were, have sprung into full activity, ex- 
cept the margin of moral improvement which an inter- 
val of waiting and working may secure ? 

It is the duty of the economist to study social forces 
as they are, or at least as they will be in the near 
future. Influences which ought now to exist, and 
which will exist in a millennial age, are not material 
for present economic calculation. The characteristic of 



236 THE ECONOMIC FUNCTION OF THE CHURCH. 

the changes in actual progress in the business world is 
the liberation of moral energy ; an existing force has 
been unfettered by the industrial revolution. The com- 
petitive system in its degenerate form held under repres- 
sion a limitless moral power which the better system 
now developing is already beginning to call into action. 
The church is the natural conservator of this force, not 
only within the limits of its membership, but in society 
at large. In many ways it diffuses the spiritual impul- 
ses that are communicated to it ; and while this work 
still has, as its chief end, the moulding of character it- 
self, it has, as a secondary end, the improvement of the 
economic relations of men. The church wields a pri- 
mary force in the new economic system, and is, to that 
extent, an arbiter of men's earthly fortunes. In a lit- 
eral sense its field is the world; and while it may 
hasten the advent of earthly peace by gathering men 
more rapidly into its spiritual fold, it may also hasten 
the spiritual work by promoting outward harmony. To 
a certain extent the higher service waits on the lower, 
and for the sake of every interest entrusted to its keep- 
ing the church is called upon to use the economic 
power entrusted to it. 



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rPHE first Part of the work is devoted to the general principles of 
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the third shows the historical development of the four typical 
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144 



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A Review devoted to the Historical, Statistical, and Comparative Study 
of Politics, Economics, and Public Law. 

Edited by the Faculty of Political Science of Columbia College. Crown 
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Its practical tendency is shown by the following partial list of 
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FEB 5 190^ 



